17 Dec

Major countries can encounter the problem of current account deficit which bring economic problems in developing countries. Current account is the part of the balance of payments which records a country’s net exports, net investment income and net transfer. In particular, positive net sales to abroad ordinarily make contribution a current account surplus as the value interest. A current account deficit must be exactly offset by a financial account surplus. The financial account is equal to net capital flows, which is equal to net foreign investment yet with the opposite sign. Since the current account balance is approximately equal to net exports. In regard to this, net exports will equal net foreign investment.

Turkish economy struggle the problem of current account deficit and there is no correlation between exports and imports ratio, so the main trouble is that there should be stabilize the balance of payments. According to the Central Bank of the Republic of Turkey, the current account deficit recorded USD 51,901 million in January-October indicating a raise of USD 12,348 million, meanwhile the current account deficit excluding except non-monetary gold reduced by USD 2,318 million over the same period of the previous year decaying to USD 42,220 million. Under these circumstances, the current account deficit increases and this impact in the ratio of foreign trade and income deficits increase.  When the government runs a budget deficit, national saving will decline unless private saving increases by the full amount of the budget deficit, which is unlikely. Since the saving and investment equation indicates that the result of a decline in national saving must be a decline in either domestic investment or net foreign investment.

Almost all economies are open economies which trade with and invest in other countries. Turkish government try to solve the problem of current account deficit and this situation bring huge destruction in the economy. As a result of this, Turkish government resettles in the economy so as to solve the problem of current account deficit which is prominent issue because the sum of current account and the financial account must be equal. Hence, the balance of payments must also equal zero. The government is to make balance between exports and imports, so this assists new investors to invest in Turkey in terms of trade credits, loans, currency and deposits and other assets and liabilities.

 

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