Energy imports and current account deficit: An econometric assessment for Turkiye

Energy, as an indicator of economic and social development, plays a crucial role in every aspect of our lives as a fundamental input in the production process, and is therefore considered a priority issue. The conditions under which energy is supplied influence the structuring of production frameworks and the determination of costs in countries. Additionally, if the necessary energy cannot be sourced domestically, resorting to imports negatively impacts the current account balance. Turkiye, due to its high energy demand and limited energy resources, meets its needs largely through imports. This situation makes Turkiye an energy-dependent country and adds further pressure to its chronic current account deficit problem. For sustainable and stable growth, it is necessary to keep the external balance under control and reduce the current account deficit. Turkey can keep the current account deficit under control by using renewable energy resources, which it cannot adequately utilize despite its great potential, and by reducing its dependence on energy imports. A Toda-Yamamoto causality test was conducted utilizing quarterly data spanning from 2000: Q1 to 2022: Q4 to investigate the causal nexus between the current account deficit and energy imports. The results of the causality test indicated a bidirectional causal relationship among net energy imports, the share of petroleum imports, and the current account deficit. Furthermore, the analysis revealed a unidirectional causal relationship flowing from the share of petroleum imports to net energy imports, and from the current account deficit to GDP to the share of petroleum imports.