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Turkey Posts Smallest Trade Gap in Two Years as Imports Drop

Turkey posted its smallest trade deficit in more than two years in August, as slowing growth hit demand for imports and gold exports continued to climb.

The gap declined to $5.86 billion, the lowest since June 2010, from $8.23 billion a year earlier, the statistics office in Ankara said on its website today. It was expected at $8 billion, according to the median estimate of seven economists surveyed by Bloomberg.

The smaller deficit is “good news for the current account deficit, but bad news for growth,” Ozgur Altug, chief economist at BGC Partners in Istanbul, said in an e-mailed statement. He cited a 16 percent decline in investment goods as a signal of a slowing economy.

Turkey’s central bank tightened monetary policy this year to tame rising inflation and curb a boom in consumer credit. The economy’s slowdown has helped reduce a current-account deficit that exceeded 10 percent of economic output in 2011.

The trade deficit reached $56.6 billion in the first eight months of the year, a decline of 21 percent from a year earlier.

This year’s increase in exports has been driven by sales of gold, mostly going to Iran after international sanctions were imposed on the country. Exports to the European Union, Turkey’s biggest market, declined 9.4 percent in the first eight months of the year to $38.1 billion.

‘Veiled Weakness’

Sales to the Middle East and North Africa have helped to make up for the weakness in exports to Europe, said Turker Hamzaoglu, an economist at Bank of America Merrill Lynch in London, said in e-mailed comments.

Still, “gold exports once again veiled the weakness,” he said. “Excluding gold, exports contracted 3.8 percent year on year.”

The lira fell 0.3 percent to 1.7938 per dollar at 1 p.m. in Istanbul.

The decline in the trade balance, “a sign of a slowing economy,” was one reason for the currency’s drop, along with an increase in the size of the central bank’s repo auctions, Thu Lan Nguyen, foreign exchange strategist at Commerzbank AG in Frankfurt, said in e-mailed comments.

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