Turkey: Record high trade deficit with rising energy costs

According to the July GTS (General trade system) foreign trade data announced by TURKSTAT in cooperation with the Ministry of Commerce; Turkey’s exports increased by 13.4% in July 2022 compared to the same period of the previous year and became 18.55 billion USD, while imports increased by 41.4% to 29.24 billion USD in the same period. Thus, the foreign trade deficit increased by 147% between July 2021 and July 2022 and reached a record high of 10.69 billion USD according to data dating back to 1984. The ratio of exports to imports decreased from 79.1% to 63.4% in the said period.

While Germany is the country we export to the most in July, it is followed by the US, England and Iraq. While exports to the 27 countries that make up the European Union increased by 5.4% to 7.37 billion USD, the share of the EU in our total exports decreased from 42.7% to 39.7%. In import items; Russia took the first place in July 2022, followed by China, Germany and Switzerland. While the share of intermediate goods (raw materials) in total imports increased in July, the share of capital and consumption goods decreased. Looking at the sub-items of intermediate goods imports, it is seen that the highest annual increase was in unprocessed fuels and oils, followed by processed raw materials, primarily food and beverage. While the share of exports of high-tech products in our total exports was 2.2%, the share of the same group’s imports in our total imports was 10.2%.

Mineral oil imports, an indicator of Turkey’s energy bill, increased by 95.7% from $4 billion to $7.7 billion, with Russia emerging as the largest source of total imports. In the same period, exports of mineral oils and refined products increased by 168.8% to $1.69 billion. Gold and precious metal imports increased by 600.6% to reach $2 billion, while gold exports decreased by 0.11% yoy. Considering the sharp increase in gold imports, it is seen that while it was a net gold exporter in the same period of the previous year, it became a net gold importer this year.

According to STS (Special Trade System), Turkey’s exports increased by 9.2% in July 2022 compared to the same period of the previous year and reached 16.99 billion USD, while imports increased by 34.1% to 26.60 billion USD in the same period. has taken place. The ratio of exports to imports was 63.9% in the said period.

The trade deficit widened to a record high in July due to rising energy costs. The foreign trade balance outlook has deteriorated since the Russian invasion of Ukraine began in February, and energy prices reached record levels, and this situation in oil and natural gas prices had the most important share in the deepening of the deficit. Although commodity prices have decreased worldwide in the last month, they still have a burden-increasing effect on our country’s accounts in foreign currency terms compared to previous periods.

Slowing consumption in Turkey’s main export markets will have a limiting effect on export performance. Due to Turkey’s economic structure, our export revenues are in Euros and our import costs are in dollars. Therefore, the situation in parity negatively affects us by reducing the value of our income and increasing the value of our expenses. The decrease in the contribution of foreign demand and net exports may cause a slowdown in economic growth. The economic differences between Europe and the US, the fact that the US is in a profile that will be less affected by the energy crisis due to its ability to produce above the demand level, and due to Europe’s dependence on Russian resources, the dollar appreciates against the Euro and the parity is reduced to levels that will negatively affect the Turkish exporters. risk exists. Russia’s cutting off the gas it supplies to Europe will worsen the current situation. In addition, production is also more costly, and due to both the supply effect and the transportation costs, while the demand in Europe will decrease, our exports may be adversely affected.

In this context, oil prices, which are close to the 100 dollar scale, should be monitored due to their increasing effect on the import bill, but at the same time, considering the supply shortage and increasing winter demand, the effects of volumetric restrictions in a possible energy crisis should not be ignored. Russia, an important source of crude oil and natural gas, allowed Turkey to make some payments in rubles, but Details of the arrangement, agreed upon by President Mr. Recep Tayyip Erdogan and Putin in August, remain confidential.

Thinking that cheap credit will support production and exports, policy makers try to increase growth with ultra-loose monetary policy within the framework of this perspective. However, high levels of credit growth and strong domestic demand also increase imports, increasing the demand for dollars, and rising exchange rates increase inflation. Turkey’s 2Q22 GDP will be released on August 31, while inflation data for August will be released on September 5.

Kaynak: Tera Yatırım- Enver Erkan
Hibya Haber Ajansı