Turkey’s trade deficit grew more than expected in July as exports to the Middle East sank and imports of consumer goods surged.
The $9.81 billion trade deficit exceeded the average estimate of $8.77 billion in a Bloomberg survey of three economists. Imports grew 10 percent from a year earlier to $22.9 billion, compared with a 2 percent increase in exports, according to data published by the statistics office today.
Exports to the Middle East dropped 30 percent to $3.1 billion from a year ago. Sales of precious metals including gold, which improved Turkey’s trade balance last year on soaring demand from Iran and the United Arab Emirates, dropped by about 75 percent to $530 million. Rising exports to the European Union partially offset the decline in goods sold to the Middle East.
“We are aware of the problems affecting exports to the Middle East,” Nihan Ziya-Erdem, an Istanbul-based economist at Turkiye Garanti Bankasi AS, Turkey’s largest bank by market value, said by phone. “What is worrying is the increase in imports.”
The lira strengthened 0.1 percent to 2.0362 per dollar at 12:08 p.m. in Istanbul, paring year-to-date losses to 12.4 percent. Yields on two-year benchmark notes fell 36 basis points, or 0.36 percentage point, to 9.58 percent, compared with a record low of 4.79 percent on May 17.
Turkish exporters have been having trouble reaching Middle East markets since turmoil began in Egypt last month following President Mohamed Mursi’s toppling by the military. Exports to countries in the Middle East and North Africa fell to $3.9 billion in July, down 24 percent from a year earlier. Year-to-date sales to the region fell 8.5 percent from last year to $27.3 billion.
The Middle East was the only region where exports fell last month, Economy Minister Zafer Caglayan said in an e-mailed statement today. Sales to the EU increased by 22.7 percent from a year ago, increasing the EU’s share of Turkey’s total exports to 41.5 percent from 34.6 percent.
The trade deficit in the first seven months of the year rose to $60.5 billion, compared with $51.1 billion a year earlier. Imports of consumption goods rose 26 percent to $2.8 billion, the highest increase among imported goods categories, according to official data. While the surge will widen Turkey’s current-account deficit, it shows the economy did not begin to slow down in July, Ziya-Erdem said.
Central bank governor Erdem Basci said Aug. 27 that Turkey may need to revise its year-end economic growth forecast from the current 4 percent. The current-account deficit, which includes the trade deficit and which the government says is the economy’s biggest vulnerability, is showing signs of improvement, Basci said. Caglayan has said Turkey may “slightly” miss the year-end current-account gap target of $60.7 billion.
“A monthly foreign trade gap under $10 billion will continue to support positive current-account deficit expectations,” Isik Okte, a strategist at Turkiye Halk Bankasi AS’s investment unit in Istanbul, said in e-mailed comments today before the announcement.