Each month, Turkish Exporters’ Assembly announces the export data of the previous month, and the Turkish Statistical Institute shares the latest situation in foreign trade. As can be seen from the GDP figures, Turkey’s export performance has been suffering for a while now, which is also confirmed by TurkStat’s latest press statement.
Reaching 14.24 billion dollars in January, Turkey’s trade deficit seems to have grown by 38.4% compared to the previous year. In January, exports increased by 10.3%, hitting 19.4 billion dollars compared to the same month of the previous year, while imports swelled by 20.7% and amounted to 33.6 billion. Evidently, Turkey has been running a greater trade deficit since the implementation of the new exchange rate policy.
The ratio of exports to imports was 63% in January last year and it has most dramatically decreased to 57.6% in January this year. The fact that this ratio, which was around 80% in 2021, is approaching 50%, puts substantial upward pressure on exchange rates.
” Déjà Vu?”
From 2000 to 2001, a “crawling-peg” regime was instituted, and just like today, the Government tried to allow the depreciation of the national currency to happen gradually. Finally, the ratio of exports to imports was brought below 50%, giving way for a sharp devaluation, which was followed by a sharp rise in the market. During that period, Turkey was excited about the full membership talks with the EU, however, things were not going as smoothly as desired due to internal political tensions. Inevitably, the balance was upset.
Today, repeating a past mistake, the Government is trying to keep the exchange rates under pressure using an undefined method, especially when things hardly go right in the country. Our trade deficit and current account deficit continue to grow. The Government is trying to prevent the market price from shaping into the value that it is supposed to be by trying to sustain the central bank’s reserves using the foreign currency brought into the country by exporters, or by giving bonuses to depositors so they keep their foreign assets in bank accounts, or by other attempts such as FX volatility-hedged account schemes and many more. I don’t know how long the Government can keep doing this. Sooner or later, things will fall apart, causing excessive fluctuation of the nominal exchange rates and eventually a very sharp decline. If this happens, interest rates will have to go up further to help restore balance.
So, given the circumstances, it seems more and more unlikely that the elections will be held later than 14 May. However, as a lot can change in countries like ours overnight, we should stay alert and avoid making any sudden decisions with uncertain consequences.