Turkey narrows trade deficit in first half of year

Reuters/Umit Bektas

• Deficit fell 30.5%
• Fall in imports narrowed gap
• Manufacturing may be slowing

Turkey’s trade deficit fell 30.5 percent in the first six months of the year after a drop in imports and inbound trade.

Turkish exports totalled just over $126 billion, up 2.6 percent on the same period in 2023, according to data issued by state statistics agency Turkstat on July 31. This compared to imports of $169 billion, which represented a fall of 8.4 percent on the January to June figure for last year. 

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The six-month trade deficit narrowed to almost $43 billion, giving an export coverage against imports of around 75 percent, stronger than the 67 percent for the first half of 2023. 

The June figures showed a return to a widening gap. Exports fell 8.3 percent year on year to $19.5 billion, while imports dipped by 4.4 percent, coming in at around $25 billion.

The government has promoted increased exports to sustain the economy. High central bank interest rates, currently at 50 percent, are being used to slow domestic demand and rein in inflation, which stood at 71.6 percent in June. 

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Of concern to the government will be a sharp rise in imports of consumer goods, which jumped around 20 percent from January to June, accounting for 15 percent of all trade inflows. 

According to economist Mustafa Sönmez, while the latest foreign trade figures show a slowdown in the economy it is not enough to bring about disinflation or slow consumer demand. The cooling is being spread over time, he said, rather than more radical measures being applied.

“Most of the demand for imported goods comes from the higher income group,” Sönmez told AGBI.

“The government has not targeted them enough with taxes or done enough to attract their cash into saving accounts with very high interest rates. So they have not been able to curb public demand.”

Manufactured products continued to lead Turkey’s export trade. They represented 94.3 percent of all shipments in H1, with sales dominated by medium level technology products.

While slightly down on the 94.7 percent for January to June 2023, overall value of manufactured exports rose a little over 2 percent year-on-year to $119 billion, with the balance mainly made up by the agricultural and mining sectors. 

Key import trends, however, point to a potential slowing in manufacturing for the second half of the year. Imports of capital goods were flat at $24.7 billion, while there was a 14.5 percent fall in intermediate goods, much of which feeds into Turkey’s industrial production. 

There has been an easing in manufacturing capacity usage, according to data issued by the Central Bank on July 25. The utilisation rate dipped to 75.9 percent for the month, down from the June level of 76.2 percent and the lowest level in more than a year.