Services upturn eases Turkey’s trade deficit woe

Unsplash/Priyanka Thakran

• Services exports up 9.5% in H1
• Positive trade gap of $24bn
• Strong performance expected in H2

Exports by Turkey’s services sector are helping trim the country’s trade deficit, with growth in overseas sales the best in the G20 and far outstripping other segments of the economy. 

Though narrowing, Turkey still has a wide trade deficit, with imports totalling almost $199 billion for the first seven months of 2024, against exports of $149 billion. 

The services segment of the economy, however, which includes software and information technology, tourism and travel, logistics and freighting, construction and consultancy, and entertainment, has a positive sales gap of $24 billion as overseas sales boom

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The sector posted a 9.5 percent increase in exports for the first half of 2024, and 4.7 percent in Q2, data from the Organisation for Economic Co-operation and Development shows. 

Services exports generated just over $47 billion in H1, of which nearly $30 billion came in the second quarter.

While the January to June figure is less than half 2023’s year-end total of $101.7 billion, second-half returns in 2024 are expected to be stronger, as they will take in the bulk of the summer tourism season, with Turkey seeing record numbers of arrivals in the peak months of July and August. 

Another strong performer in services exports was software and technology. Turkey increased its reach in areas such as aviation safety and gaming, with software sales abroad alone projected to earn $5 billion.

Not only do service exports generate income, they also can create investor interest, thus becoming an economic multiplier, according to Gökhan Say, founder and CEO of the early-stage tech investment, growth and exit company CyBridge Capital. 

“For example, in exports it is not just about the exit of the software but the export of the firm as well,” he told AGBI.

“The company can go global, and foreign investment will flow into the country. This is very important for Turkey, as it could attract billions of dollars.”

While services exports climbed, however, so did imports, increasing by 12 percent in H1 to $23 billion. But this still left inbound services at less than half the export total. 

Services imports fell 3 percent in Q2, widening the services sector trade gap, and perhaps an indication of the impact of the government’s efforts to curb domestic demand through imposing high interest rates.

Turkey also outpaced the broader international trend, with services imports and exports across the whole G20 up 1.1 percent and 1.9 percent respectively for the April to June quarter, with only India coming close in either in or outbound service trade.