Surge in exports leads to rapid rebalancing of Turkish economy - Financial Times

Turkey’s current account balance shows signs of a swift correction after lira’s depreciation in August with Turkish exports jumping 23 percent in September, the Financial Times said on Friday.

Turkish lira has dropped by 40 percent since the beginning of the year, but it hit record lows in August, due to a diplomatic crisis with the United States over the almost two-year detention of an American evangelical pastor.

Preliminary data released this week by the Turkish Ministry of Trade suggested the goods trade deficit fell to $1.9 billion in September, a 77 percent decline from the same month last year, the Financial Times said, following year-on-year declines of 59 percent in August and 33 percent in July.

The decline in the current account deficit is a result of a sharp increase in Turkish exports, rather than of consumers and businesses cutting back on imports due to rising prices. Imports decreased 18 percent year-on-year in September, while exports jumped 23 percent, taking Turkey’s export-import coverage ratio to 88.4 per cent, from 59.1 percent a year ago.

“The correction seems to be quicker and stronger than many expected,” Nora Neuteboom, economist at ABN Amro told the Financial Times.

All major sectors have been contributing to the surge in exports in September according to the data from the Turkish Exporters Assembly, the Financial Times said. “Automotive exports rose 21 percent year-on-year to $2.6 billion, agricultural produce 16.5 percent to $1.9 billion, apparel 13.8 percent to $1.5 billion and steel exports an impressive 95 percent to $1.4 billion.”

Charles Robertson, chief economist at Renaissance Capital, an investment bank, estimated that Turkey would record a current account surplus of $2.1 billion in August and September, a level far higher than for any month since 1992, the Financial Times said.

“The trade deficit is improving in the months where there is a lot of tourism and there has been more tourists this year than ever,” Robertson said, referring to Turkey’s increasing summer tourism revenues.

Robertson does not expect Turkey to continue to produce monthly current account surpluses as winter approaches, but estimated that the rolling 12-month deficit, which peaked at $58 billion in May, is likely to fall to about $6 billion by July 2019, the Financial Times said.