Turkish Lira: Trade data underline external pressures – Commerzbank

Commerzbank’s Tatha Ghose examines Turkey’s June trade figures, revealing a 26.2% year-on-year increase in the trade deficit to USD 10.4 billion. While both exports and imports rebounded after holiday distortions in May, imports surged more than exports. Ghose emphasizes that the trade deficit remains around 6% of GDP, indicating ongoing balance of payments weaknesses.

Turkey's June trade data showed the external trade deficit widening by 26.2% y/y to USD 10.4bn. Exports grew by 21.7% y/y to US$24.9bn, while imports expanded even faster, up by 23.0% y/y to US$35.3bn. This outward appearance of strong trade masked an alarming widening of the trade balance, partly due to May's holiday distortions and the year-on-year comparison offering limited insight into recent trends.

Seasonally adjusted, both exports and imports rebounded after dipping in May, but imports now outpace exports. Intermediate goods and capital goods imports rose by 30.0% y/y and 19.6% y/y, respectively, while consumer goods imports fell by 1.2% y/y, suggesting risk-averse behavior amid deteriorating consumer confidence and rapid stockpiling of raw materials by industry.

The trade data are not surprising but underscore Turkey's precarious balance of payments situation, despite years of monetary tightening attempts to tackle macroeconomic imbalances like the current-account gap. Overall, the trade deficit has hovered around 6% of GDP recently, showing little underlying improvement.