Turkey's Trade Deficit Narrows to $7.9 Billion in July, With Surging Gold Exports to Iran

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Researched by Industrial Info Resources (Sugar Land, Texas)--Turkey's trade deficit narrowed to $7.9 billion in July 2012, and this amount was slightly higher than analysts' expectations of $7.7 billion. According to the figures from Turkish Statistical Institute (TURKSTAT), the pace of export growth continued to decelerate compared to May and June 2012. Turkey's exports expanded 8.5% on the year compared with the first seven months of 2011, while imports contracted 1.5% during the same period.

Looking at the 12-month trailing figure, the trade deficit declined $1.3 billion month-on-month in July 2012 to $93 billion, which is 13% lower than the peak level of $107 billion, which was seen in October. Net oil imports were down 9.6% year-on-year in July, which still accounted 50% of the monthly trade deficit. Accordingly, the monthly exports coverage ratio in seasonally and calendar adjusted terms stood at 65.4%, while the 12-month cumulative ratio rose to 61%, maintaining its uptrend since October 2011.

Turkish Economy Minister Zafer Caglayan said the exports would reach $148.5 billion by year-end, compared with the $135 billion record set in 2011. "Turkey feels the impacts of the crisis in EU [European Union] he warned in last five months of this year. Turkish exporters turning toward U.S., Mideast, Russia, Asia as EU economic crisis persists," Caglayan said in a statement from his office.

The European Union's share of exports through July declined to 34.3% from 47.7% while the share of Middle East and Africa countries increased from 26% to 39.9%.

Meanwhile, Iran became Turkey's top export market this year with surging gold sales of $6.2 billion in July 2012. With surging numbers, Iran outpaced Germany, traditionally the leading destination for Turkish goods. Iran's share in July jumped to 16.8% from a mere 2.7% the same time in 2011 due to a surge in gold exports, whereas imports from top twenty countries contracted with the exception of Russia, the U.S., Switzerland, United Arab Emirates, and Ukraine.

Gold exports in the first seven months of the year are already five times more than the total in 2011 owing to rising demand from Iran, which accounted for only 4% of sales two years ago, when its purchases started.

Economists warn that because gold exports to Iran have been stripping away, Turkey's trade performance is weakening. "The exports performance in July as in the previous three months was attributable to the jump in jewellery (including gold) exports (up by 705% year on year in July, translating into 372% year-on-year surge to $8.9 billion in January to July 2012), supporting concerns about the sustainability of strength in Turkey's performance despite weak demand in the Euro zone," said Sengul Dagdeviren, a senior economist at ING Bank based in Istanbul. "When we exclude jewellery, year on year growth in total exports was -7.1% in July and 3.7% in the first seven months of 2012," she said.

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