Urgent need for a new approach to Foreign Trade

As a new week begins, let’s see what lies ahead:

  1. New cabinet expected to take its final form before the oath-taking ceremony
  2. Exchange rates and interest rates movements
  3. Trump’s trouble stirring moves
  4. January-May Foreign Trade Statistics, June Exports volume
  5. Soon to be releases inflation data

Ruling Party committees convened on Friday to discuss crucial issues waiting to be solved after their latest electoral victory, such as:

“Early local elections” may be held in November in order to make amends to those for not being on the list Parliament Members as well as take advantage of AK Party’s winds of victory. For a snap election, a tiny amendment to the electoral law is more than enough as the majority needed for it is already present in the parliament. On the other hand, as EU and Foreign Affairs Ministries have been emerged, Government should appoint a capable minister with a sound and moderate approach to international diplomacy so as avoid any conflict regarding the S-400 deal before the U.S. trial in Iran sanctions case concludes. And finally, Economy Administration is expected to urgently appoint well-equipped officials that are able to refer to the use of internationally recognized rules.

The reason why Ruling Party officials have worked non-stop on last week was probably about giving its final shape to the ministers list expected to be announced right after Erdogan’s oath-taking ceremony as President of Turkey.

We can see that USD/Try still stands within a band around 4.50-4.70. As for the benchmark rate, it is ranging between 19% and 20%. New officials in the Economy Administration and their first statements will be quite determinative for the future of both exchange rates and interest rates.

The fact that Trump has clearly stated that he wants out of World Trade Organization shows that he is following a pre-designed plan. Trump’s mission is to disable, the existing institutions in the world before the arrival of the new world order, even eliminate them if possible. It looks like the World will soon be at the verge of a global combat.

January-May Foreign Trade data indicates that foreign trade deficit and current account deficit have grown ever larger. Export to import ratio has drastically fallen by 6 points, compared to same period last year. As a matter of fact, the outcome of measures taken by the Ministry of Economy since 2014 has sadly turned out to be fruitless. We don’t have any choice but to hope for the new economy administration won’t make the same mistakes their predecessors made. It must be understood that foreign trade deficit will be never ever narrowed down by levying additional tariffs on imports. Foreign Trade deficit will not shrink unless Turkish industries increase the value-added content of their products.

Now, let’s take a quick look at this month’s inflation rate: I don’t expect to be surprised by the inflation data due to be released tomorrow. I have already expressed that I was anticipating CPI inflation around 14%. My expectation remains the same as also confirmed by June retail price index released by Istanbul Chamber of Commerce.