Turkish trade deficit balloons in August as lira woes spark gold grab

Turkey’s trade deficit soared in August as purchases of gold from abroad jumped almost four-fold to $4.1 billion, the highest since 1989.

Turks appeared to be scrambling to buy up gold after the lira dropped to a record low against major currencies last month.

The spending spree helped imports increase by an annual 21 percent to $18.8 billion, widening the trade deficit by 170 percent to $6.31 billion.

Exports slid by 5.7 percent to $12.5 billion despite the lira’s decline, preliminary data published by the Trade Ministry on Wednesday showed.

The Turkish lira hit an all time low of 7.41 per dollar last month, taking losses this year to almost 20 percent. The slump in the currency’s value has prompted the central bank to tighten monetary policy but it has not raised its benchmark interest rate of 8.25 percent after President Recep Tayyip Erdoğan opposed the move.

The lira has been weakening sharply due to concerns about the widening current account deficit – of which the trade deficit is a major contributor. Investors and local deposit holders have also been selling the lira due to lax monetary policy, a lending spree by state-run banks and the central bank’s depleted reserves of foreign currency.

The lira fell 0.3 percent to 7.38 per dollar on Wednesday.

Monetary policymakers have spent tens of billions of dollars defending the currency this year.  

The fall in exports was a result of shrinking demand in the European Union, the main market for Turkish goods, Trade Minister Ruhsar Pekcan said. Exports are expected to gain strong momentum in the coming period, she said.

The trade deficit in August meant the gap for the first eight months of the year stood at $32.9 billion, an increase of 69 percent compared with the same period of 2019. Exports fell by 13 percent while imports declined 1.1 percent.