At USD 5.6bn, the January C/A deficit came in worse than expected (Erste: USD 5.3bn, consensus: USD 5.4bn). The weaker-than expected shuttle trade was the main reason behind the surprise to our call. The non- energy C/A balance registered a USD 1.5bn deficit. 

The narrowing in the C/A deficit slowed down markedly as the 12- month rolling C/A deficit edged down to 46.8bn in January from December's revised 46.9bn (5.9% of GDP) reading. In line with TURKSTAT'S methodology change regarding tourism revenues, the CBT also revised the C/A deficit downwards for the preceding years back to 2003. The downward revisions were roughly USD 2bn for 2011 and 2012, while there were USD 1.2bn and 1.8bn downward revisions for 2010 and 2009, in the same order. Excluding energy, the 12-month rolling C/A balance remained flat m/m with a USD 5.5bn (0.7% of GDP) surplus. 

The January C/A deficit was financed mainly by the USD 2.5bn increase in foreigners' deposits, USD 1.6bn in portfolio inflows and USD 1.2bn in private sector loans from abroad. Meanwhile, banks' accounts abroad, which are a very volatile item, declined by USD 2.0bn, contributing to the external financing. Turkey attracted USD 0.4bn in FDI in January, with USD 0.2bn pouring into the energy sector. There was a limited USD 0.1bn in unregistered inflows. The strong capital inflows prompted a visible USD 3.7bn increase in the FX reserves. 
Despite the downside risks to our deficit forecast linked to the change in the tourism revenue methodology, we prefer to remain cautious and stick with our USD 57.8bn (6.7% of GDP) C/A deficit forecast for 2013. We expect the turnaround in the C/A deficit to start in the upcoming months.