The balance of payments in August revealed quite interesting data.
For one, a current account deficit of 3.1 billion dollars was announced in a month where there was a seasonal over or under deficit due to the effect of tourism and service sector revenues. The 9-month current account deficit rose to 39.7 billion dollars and an annual rate of 40.9 billion dollars.
➔The growth in the foreign trade deficit stemming from energy and gold imports is effective in this. As a matter of fact, in the 8-month period, the foreign trade deficit increased by 160 percent to 73.4 billion dollars.
➔The increase in energy imports is due to global price increases.
➔The increase in gold imports is due to both the tourism going towards a record and the accumulation of weddings that could not be held due to the pandemic this year. Gold imports in the 8-month period caught all of the previous year. In August, a net $2.2 billion worth of gold was imported.
NET RECORD OF ERRORS AND Omissions
➔Tourism revenues increased by $9.3 billion in 8 months to $19.5 billion, partially offsetting the trade deficit. Tourism revenues, which reached $5.1 billion in August, broke a record on a monthly basis.
The financing side of the balance of payments was also strong in August. Some of the capital inflows from Russia for the Akkuyu Nuclear Power Plant took place in July and some in August data. As the deficit was financed, the Central Bank reserve dropped $10.8 billion.
➔Because it wasn’t just nuclear money that came in. Net Errors and Omissions item also gave a surplus of 4 billion dollars. A sum of money to cover the entire current account deficit of 3.1 billion dollars.
➔In 8 months of the year, an inflow of 28.3 billion dollars was realized with the Net Errors and Omissions item against the current account deficit of 39.7 billion dollars. Foreign currency inflow of uncertain source reached its highest level ever with this amount.
➔However, the money that comes with Net Errors and Omissions is very volatile and volatile. As a matter of fact, the annualized amount, which was 18 billion dollars in August last year, decreased to 8 billion dollars in December and finally increased to 23 billion dollars.
HALF DECREASING DIRECT INVESTMENT
➔ Direct investments are not only decreasing, but more of them are shifting to real estate.
➔During the same period last year, $3.4 billion of the $8.4 billion direct investment amount was real estate.
In the 8 months of this year, 4.3 billion dollars of the direct investment, which decreased to 6.8 billion dollars, was real estate.
➔Therefore The net foreign direct investment amount excluding real estate fell from $5.1 billion to $2.5 billion this year, halving it.
LOCAL CAPITAL IS ALSO AT THE EXIT
In portfolio investments, the net inflow of $5.1 billion last year turned into an outflow of $6.9 billion this year.
➔In addition, while the foreign portfolio investments of residents decreased by 80 million dollars last year, they increased by 4.4 billion dollars in the 8 months of this year.
Thus, there was a net outflow of 11.2 billion dollars in portfolio investments. with strangersThe residents of Turkey took a large amount of money abroad.
It is possible to say that besides those who are not satisfied with domestic financial investment instruments, those who try their luck abroad for different reasons have increased.
➔If we make predictions for the coming months, taking into account the causes of the current account deficit and foreign exchange flows. We may face a deficit of $60 billion a year.
➔We assume that a monthly deficit of 5 billion dollars will be realized in the future. Although growth will decrease in the last quarter of the year, we see little flexibility in imports.
➔Because imports do not increase in real terms anyway. Increasing prices. The main increase in imports is the high energy prices, where no change is expected as we enter the winter.
GOING TOWARDS 7 PERCENT OF GDP
The current account deficit of $60 billion is expected to be realized. The GDP rate reaches 7 percent, which is the second highest deficit after 2011.
➔In order for the current account deficit to continue to run, it must first be financed. Net Errors and Omissions became decisive in this regard. If the war in the north continues, it is expected that the inflow of money in this channel will continue.
➔The high current account deficit may continue not only this year but until the 2023 election, and may even increase if there is no easing in energy prices.
➔Because, although the credit taps were turned down and this caused an economic slowdown, new special credit packages are being announced. 100 billion lira loan to tradesmen will be at 7.5 percent interest. Preparations for a new KGF loan package are underway.
➔The Central Bank continues to extend the 150 billion lira export-oriented investment and loan for the tourism sector.
VOTER SATISFACTION WITH GROWTH
At the beginning of the year, the minimum wage will have to be increased at least as much as the food price increase, currently 93 percent. This decreased slightly due to the base effect of inflation. It may bring up a wage increase of 70 percent.
➔Minimum wage can also increase consumption and growth in the first months of the year by raising the general wage level, resulting in import demand.
➔The satisfaction of voters in a country going to elections depends on high growth, low unemployment and low inflation.
➔Although very high inflation is expected to decline due to the base effect before the election, the place where it fell will still remain high.
➔In this case The whole weight of voter satisfaction will be built on growth. In this regard, a choice was made in favor of growth after Naci Ağbal was removed from the Presidency of the CBRT in 2020.
➔Under current conditions, the current account deficit does not fall until the election, on the contrary, it rises. Is it a problem in the eyes of the electorate or not? As long as it is financed by the economy administration, the problem will be ignored.