Turkish foreign trade deficit largest since 2018 currency crisis
Turkey reported a foreign trade deficit of $6.28 billion in August, the biggest shortfall since a currency crisis struck in the summer of 2018, as imports jumped.
The deficit widened from $2.34 billion in August last year and from $2.7 billion in July.
The Turkish lira has slumped to successive record lows against the dollar this year after economic stimulus by the government led to a surge in demand for imported goods, raising concerns for economic stability. Investors have called on the central bank to tighten monetary policy significantly to help narrow the trade gap and curb inflation, which stands at 11.8 percent.
Imports surged by 20 percent annually in August to $18.74 billion, led by an increase in capital goods and consumer goods of 39 percent and 20 percent, respectively, the Turkish Statistical Institute said on Wednesday. Exports fell by an annual 5.7 percent to $12.46 billion, with sales of manufacturing goods falling 6 percent.
The central bank raised its benchmark interest rate by 2 percentage points to 10.25 percent last week to help defend the lira and rein in inflation. But borrowing costs for banks remain below the annual inflation rate.
"Terrible trade numbers for August," said Tim Ash, senior emerging markets strategist at BlueBay Asset Management in London. "Underlines the challenge for the central bank - they need to tighten policy to cool demand for dollars."
The lira rose by 0.4 percent to 7.78 per dollar on Wednesday. It slid to a record low of 7.85 per dollar on Tuesday. The currency has lost almost 24 percent of its value this year.
In the first eight months of the year, the trade deficit widened to $33 billion from $19.4 billion a year earlier as exports shrunk 12.9 percent and imports declined 1.2 percent.