http://www.hurriyetdailynews.com/n.php?n=turkish-economy-suffers-blow-to-8216achilles8217-heel8217-2011-05-11Turkey’s current account deficit, regarded as the Achilles’ Heel of its economy, surged to an unprecedented level in March, boosted by an exceptionally high level of profit transfer by foreign operations to their parent companies abroad. The $9.8 billion monthly figure, which was above market expectations of $8.2 billion, more than doubled from $4.3 billion in March last year.
It was the biggest deficit since the Turkish Central Bank began releasing monthly figures in 1984, Bloomberg News reported.
A current account deficit occurs when a country's total imports of goods, services and transfers is greater than its total export of goods, services and transfers. The gap makes the country a net debtor to the rest of the world. When the deficit is financed by short-term capital inflows, such as investments in stocks and bonds, financial stability hangs in the balance – and a sudden exit of that capital or failure to attract more of it could trigger a crisis. Indeed, many crises that Turkey has gone through in the past five decades were preceded by a booming current account deficit.
The gap exceeded estimates because of a larger-than-usual repatriation of $1.8 billion in profits by foreign companies based in Turkey, said Tevfik Aksoy, London-based head of emerging-market economics for the region at Morgan Stanley. “This will be a one-off issue and we should not see a surprise like this for a long time,” Bloomberg quoted him as saying.