While current account deficit, which was USD 31.9 billion at end-2006 did not exhibit a remarkable change in the first half of 2007, it reincreased in the second half of the year and reached USD 37.6 billion by the end of 2007. Thus, considering the revision in the national accounts as well, the ratio of the current account to GDP, which was 6.1 per cent in 2006, fell to 5.8 per cent at end-2007.

The downward trend in the current account deficit driven by the global financial turbulence in May 2006 ended in the third quarter as imports regained momentum after these negative effects diminished and the uncertainty over elections faded. The continued strong export growth and the rebound in tourism revenues could not offset the expansion of the current account deficit. As a result of this, net exports contributed negatively to GDP growth in the third quarter. The said trend is estimated to persist also in the last quarter of the year.

Indicators related to the current account deficit and the financing structure continued to improve in 2007. The export/import coverage ratio displayed a slight increase compared to 2006. On the other hand, the reduced share of short-term sources in total financing remarkably increased the coverage ratio of short-term external debt by exports and reserves. Besides, the ratio of the Central Bank’s reserves to total imports slightly increased in 2007.

As a result, the current account deficit in 2007 was recorded as USD 37,575 million, which is 17% higher than the USD 31,893 million deficit posted in 2006.

The share of FDI has been increasing in Current Account financing. Approximately 60% of the current account deficit was financed by the foreign direct investments in 2007. The external borrowing of non-bank private sector is also increasing with the aim of financing trade and investment activities.