Imports fuel Turkey's growing trade deficit

Imports fuel Turkey’s growing trade deficit

Turkey's trade deficit continued to widen in November due in part to a 60.4% increase in imports from a year ago, according to data released by Turkey's Central Bank (TCMB). The gap in Turkey's foreign trade balance shot up 132.3% thanks to imports, from $1.28 billion in November 2003 to $2.96 billion in November 2004. The growth of imports during the same period outpaced exports 60.4% to 37.3%. TCMB data show total November 2004 imports and exports as $8.41 billion and $5.45 billion respectively. Lower volatility in Turkey's finance market and the weak US dollar contributed to the dramatic rise in imports. At the same time, a real decrease in the labor costs and an increase in productivity contributed to the increase in exports, but the 11.1% hike in consumer power energy prices had a negative impact. In addition, developments in foreign trade, a sharp increase in tourism revenues, and a decrease in investment accounts impacted the increasing current account deficit. Through the first eleven months of 2004, exports showed a 31.8% increase to $42.7 billion from 2003, while imports increased 42.1% to $86.8 billion. Exports could only cover 64.8% of imports, thus adding $12.7 billion to the current account deficit. For the 12-month period of November 2003 – 2004, exports increased 32.5% to $60.8 billion, while imports rose 43% to $95.1 billion. The foreign trade deficit during this period was $34.2 billion. Exports of the iron & steel industry exhibited a 148.3% increase in monetary terms from November 2003 to 2004. Iron and steel exports during the January - November 2004 period totaled $4.73 billion, up 76% from the same period of 2003. The figure accounted for a 4.8% share in overall exports. China's insatiable demand forced global steel prices to new heights. Turkey, which is the 12th largest steel producer in the world, increased its production 12% in 2004. Turkey's exports to Europe dropped off during January-November 2004; however, exports to the Middle East and Russia increased 41.5% and 35.7% respectively. 50.2% of exports were priced in Euros and 42.9% in dollars in 2004. In terms of imports, the automotive industry recorded the highest increase at 166.5% during the first nine months of 2004. Vehicles and vehicle accessories covered 25.4 points of the 42.1% increase in overall imports. Iron & steel imports rose 110.3% in November 2004, from $370 million to $779 million. Imports from Korea, China, Russia and Ukraine rose during the January – November 2004 period, whereas imports from the EU and Middle East declined. 40.5% of imports were performed in euros, and 54.8% were based on US dollars. Although it began slowing down due to a drop off in domestic demand, the Turkish economy continued to expand in the third quarter of 2004. Q3 GDP came in slightly below expectations, increasing only 4.5% compared to 2003; however, GDP grew 8.7% in the first nine months of 2004. A strong showing in industrial production led to the GDP growth, while the construction sector once again retracted. Durable, semi-durable and non-durable consumer goods, and machinery & equipment investment also contributed to economic growth. Total industrial growth in November 2004 increased 9.6% from the previous year, while the manufacturing industry posted gains of 10.1%.