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Turkey’s trade deficit hits $61bn as exports drop

Turkish central bank chief Hafize Gaye Erkan Reuters
Central bank governor Hafize Gaye Erkan has overseen 2,650 basis-points of tightening with another rate rise expected on Thursday
  • Figures are for first six months of 2023
  • 2023 inflation forecast more than doubles to 58%
  • PMI drops below 50-point mark

Turkey’s foreign trade deficit increased by 18.7 percent to $61.2 billion in the first half of this year, with exports down by 1.9 percent compared with a 4.1 percent rise in imports.

Exports from January through to June dropped to $123.3 billion, while imports climbed to $184.6 billion, according to the Turkish Statistical Institute.

The country revealed a foreign trade gap of $299 million in June, excluding energy products and non-monetary gold.

Turkey’s central bank in July said it set the monthly growth limit for lira commercial loans at 2.5 percent, down from 3 percent, although this was not applied to export, investment and agriculture loans. 

Steps were taken to support exporters’ access to financing, with the daily limit for rediscount credits raised to 1.5 billion lira ($55.6 million).

The bank hiked its policy rate by 250 basis points to 17.5 percent on Thursday, continuing to reverse President Tayyip Erdoğan’s low-rates promise.

The country’s new central bank chief, Hafize Gaye Erkan, vowed to continue gradual monetary tightening and more than doubled the bank’s 2023 inflation forecast to 58 percent from 22.3 percent.

The country's latest purchasing managers' index (PMI) dipped to 49.9 in July from 51.5 the previous month. The 50-point index mark separates growth from contraction.

It ended a six-month sequence of expansion and was attributed to a rise in input prices linked to the currency weakness – the lira has lost more than 30 percent of its value so far this year – as well as reports of higher wages.

"Resurgent price pressures dampened demand for Turkish manufactured goods in July," Andrew Harker, economics director at S&P Global Market Intelligence, said.

"Both input costs and selling prices rose at much stronger rates at the start of the third quarter, making it harder for firms to secure new business. 

“Manufacturers will be hoping that inflation starts to level off again to aid in the pursuit of new business.”