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ANALYSIS: December foreign trade foretells 2019 performance

The contraction in the current account deficit is likely to phase out by mid-2019, leading to the normalization of the upward pressure on the lira.

ANALYSIS: December foreign trade foretells 2019 performance

Turkey’s foreign trade deficit shrank by an annual 71% to USD2.67bn in December as the monthly imports slumped 28% to USD16.6bn versus the 0.2% rise in exports to USD13.9bn; as per the Turkish Statistical Institute data.

For 2018 as a whole:

  • Exports increased by 7% compared to 2017 and reached 168 billion 23 million dollars from 156 billion 993 million dollars last year.
  • In the same period, imports decreased by 4,6% from 233 billion 800 million dollars to 223 billion 39 million dollars.
  • Thus, the foreign trade deficit decreased by 28.4% from 76 billion 807 million dollars to 55 billion 16 million dollars.
  • While the ratio of exports to imports was 67.1% in 2017, it increased to 75.3% as of the end of last year.

What do the figures mean?

2018 was a year with a split personality.
The pre-election boost on domestic consumption brought macroeconomic imbalances, especially on the inflation and current account deficit fronts that brought figures to a point of unsustainability; leading to a violent exchange rate crisis starting from the middle of the year.

Foreign trade data also evolved in this cycle by changing its trend.

The strong increase in imports in the first half of the year turned into a contraction of  20-30%, while single-digit growth performance on the export side was replaced by double-digit growth on an annual basis. Developments in the European economy, which is still Turkey’s largest export market also had its toll on exports.

It is noteworthy that exports increased by 0.2% yoy in December, according to the provisional data. It is important whether the weakness in this scale will continue into 2019 while it was obvious that the double-digit growth in exports staged in the final months of 2019 would not continue.

Looking forward into 2019, the double-digit contraction on the import side looks set to continue for most of the first half, while in the second half of the year, imports are likely to increase, albeit weakly. Turkish economic activity is engaged to a prolonged recession paring demand for imports.

Thus, the contraction in the current account deficit is likely to phase out by mid-2019, leading to the normalization of the upward pressure on the lira.  The nester community will then with its focus more on other macroeconomic indicators, especially inflation and the monetary policy.


The slide in imports is easing concerns about Turkey’s current account deficit, which had ballooned to as much as 6.5% of gross domestic product early last year as the government sought to stimulate economic growth ahead of presidential elections in June.

The current account posted a surplus for the fourth consecutive month in November; with the cumulative figure easing to USD34bn- or to 4.1% of the GDP.



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