Turkish imports shrink as lira’s slump hits economy
Turkish imports shrunk and exports increased as the impact of a slump in the lira’s value on the country’s economy strengthened, trade data on Wednesday showed.
Imports, which become more expensive as a currency falls, dropped 6.7 percent in July from a year earlier to $20.1 billion. Exports rose 12 percent to $14.1 billion as Turkish goods sold abroad became cheaper to buy. The figures compare with a decline in imports of 3.8 percent in June and a 1.3 percent decrease in exports during that month.
The lira has dived 40 percent against the dollar this year as economic stimulus by the government raised concerns about overheating. The country’s economic woes have been exacerbated by a political crisis with the United States over the internment of Americans, prompting U.S. sanctions this month against Turkish ministers and higher tariffs on Turkish steel and aluminium.
The import and export figures meant Turkey’s trade deficit shrank by an annual 33 percent to $6 billion in July, the Turkish Statistical Institute said.
The Turkish economy is expected to shrink in the third quarter, most economists say, as a readjustment caused by the falling lira and higher interest rates hits output and consumption. The lira’s decline in August has totalled 20 percent, meaning imports, and hence growth, are likely to be hit further during the month and beyond.
Despite the trade data, which may ease investors’ concern about a current account deficit that has reached 6.5 percent of GDP, the lira dropped again on Wednesday. It fell 1.8 percent to 6.38 per dollar at 10:42 a.m. in Istanbul, sliding for a third day following a religious holiday last week.
Turkey’s central bank failed to raise interest rates in August to stem the lira’s decline and put a brake on inflation, which accelerated to 15.9 percent in July.
President Recep Tayyip Erdoğan, who gained more executive powers at elections in June, opposes higher interest rates saying they are inflationary. His government says the lira is free-floating, indicating that it has elected to allow the currency to lose value rather than approve measures such as rate hikes that may slow economic growth further.