Türkiye's current-account surplus reflects shrinking industry, and energy sends the bill

The noise is in the surplus, the signal in the bill's composition

The CBRT publishes the August balance of payments on 13 October. In an AA Finans survey reported by Dünya, 14 economists expect a current-account surplus of about $3.5 billion, with forecasts ranging from $850 million to $4.5 billion. July's surplus was just $36 million. Headlines will read the August surplus as a recovery in the external balance. That reading is noise, because the surplus stems from shrinking domestic production and seasonal tourism income rather than export strength.

The same survey shows a 12-month current-account deficit of $40.7 billion and a year-end consensus of a $48 billion deficit, with forecasts spread between $35.8 billion and $54 billion. Economists, in other words, are pricing the August surplus as a temporary breather that will be given back over the rest of the year. To see the constraint, one has to look inside August's trade figures.

Energy and gold account for four-fifths of the gap

TurkStat data reported by Anka show exports up 8.1% to $23.47 billion in August and imports up 10.5% to $28.71 billion. The trade deficit widened by 22.3% to $5.24 billion. Excluding energy and non-monetary gold, the deficit shrinks to $1.09 billion and the export-to-import coverage ratio rises to 95%. On this arithmetic, about $4.15 billion of August's deficit, or four-fifths, comes from energy and gold.

According to an AA report of 30 September, energy imports reached $6.46 billion in August, 33.8% above the $4.83 billion of a year earlier. Crude import volumes, by contrast, fell 1.1% to 2.84 million tonnes. Türkiye is buying less oil and paying more for it; the bill is swelling on price, not volume. Energy made up about 22.5% of total imports in August.

Prices climbed further in September

According to the October outlook of the US Energy Information Administration (EIA), reported by Trend, Brent averaged $114 in September, $23 above August, and touched $131 on 15 September. Shut-in Middle East crude output averaged about 4.8 million barrels a day in September. The EIA expects an average of $105 for the fourth quarter, an upward revision of $14 from the previous month.

This suggests August's energy bill marks the start, not the peak. Trade Ministry flash data show September imports up 5.9% to $31.2 billion and exports up 15.4% to $26 billion, implying a monthly deficit of about $5.2 billion. TurkStat's September energy breakdown arrives at the end of the month. An oil price $23 above the August average inflates the bill even if volumes stay flat.

Fading industry is what keeps the balance

According to Bloomberg HT, industrial production fell 1.9% year on year in August, a fourth straight monthly contraction. In TurkStat's breakdown reported by Dünya, capital goods output fell 5.1% and non-durable consumer goods 4.1%; only the energy group grew, by 4.4%. TurkStat data show that 70.7% of August imports were intermediate goods. As manufacturing contracts, intermediate imports slow and the non-energy deficit stays small.

Leading indicators point the same way for September. The ISO PMI, reported by Yatırımx, fell to 47.9; firms said fuel, oil and transport costs linked to the Middle East had pushed input inflation to a four-month high. Capacity utilisation, meanwhile, rose to 74.1% according to CNBC-e. The divergence suggests firms are running existing capacity without orders or building inventory; confirmation will have to wait for October data.

The real equation facing the MPC

The constraint is this: as long as energy prices stay high, the only buffer for the external balance is weak domestic demand and manufacturing. If a rate cut on 22 October revives industry, intermediate imports will rise and stack on top of the energy bill. Holding rates, on the other hand, prolongs the four-month contraction in manufacturing. The CBRT is choosing between two bad options with a balance sheet whose net reserves have fallen to $37.9 billion.

A data note. On 9 October Investing.com and Trading Economics showed a 277 basis-point jump in the 10-year yield in a single day. According to Borsatek's morning bulletin of 9 October, the domestic benchmark 10-year had already closed 8 October at 35.52% and the 2-year at 39.75%. Bloomberg HT's benchmark screen shows the 10-year at the same level and the 2-year at 39.59%. The jump looks less like a market move than these two sites' series catching up with the domestic benchmark. The domestic benchmark 2-year yield sits about 275 basis points above the 37% policy rate; the market is not pricing cuts as fast as the two sites' stale series implied.

Our thesis: the August current-account surplus is temporary, the energy bill is lasting. The thesis would be refuted if annual growth in energy imports fell below 15% in September and October trade data and Brent settled below $90.