The current-account deficit, which surged to a record US$48.5bn, or 6.6% of GDP, in 2010, continued to widen in early 2011. The increase was entirely attributable to the deterioration of the merchandise trade deficit, which in the first two months of 2011 more than doubled compared with a year earlier, to US$11.8bn. Strong domestic demand and high global commodity prices continued to boost the import bill in the first two months of 2011, notwithstanding the Central Bank's efforts to curb credit growth and the recent relative weakness of the lira. Meanwhile, exports to some countries in political crisis started to fall-according to customs-based data, exports to North Africa declined by 10% year on year in the first two months of 2011 while sales to almost all other regions recorded strong growth.

Capital inflows were more than sufficient to offset the current-account deficit in the first two months. In February, foreign investors made net purchases of US$1.8bn in the domestic government bond market. The balance-of-payments data also included another high positive figure of US$3.3bn for net errors and omissions, which encompasses payments which cannot be classified.

According to weekly Central Bank data, official gross foreign-exchange reserves have remained on an upward trend in 2011, rising from US$82.3bn at the end of January 2011 to US$86.8bn on April 1st. The increase reflects continued strong capital inflows but also the strength of the euro against the US dollar, which boosts the dollar value of euro-denominated reserves.