Vulnerability in the Turkish economy persists

BBVA Research and ING Global analyzed Turkey's September current account balance data and addressed the key factors influencing the trajectory of this balance. The foreign trade deficit and financial vulnerabilities stood out in the analyses.

According to the report by ING Global, Turkey's September current account balance followed a course in line with expectations. However, it was noted that the capital account played a significant role in the formation of this balance. Looking at the details, the increase in the foreign trade deficit compared to last year was found to be noteworthy. The institution stated that the weakness in domestic demand and tensions in global trade will be decisive for the current account balance in the coming period.

BBVA Research, on the other hand, emphasized that household financial assets in Turkey declined relative to GDP in the second quarter, while the rise in the net short foreign exchange position increased financial vulnerability. The report shared the information that household financial assets fell to 38.7 percent of GDP, while the net short foreign exchange position reached its highest level since 2018 at 185 billion dollars.

BBVA Research also assessed that, "While the ratio of public debt to GDP remains low, the share of wholesale dollar-denominated funding in the banking sector is increasing. Conversely, with the rise in the share of TL in indebtedness, maturities are extending."