Weak lira has nearly closed Turkey’s trade gap

Outlook

The decline in the lira which became precipitous in August discouraged imports and boosted exports in the following months, bringing the October foreign trade deficit down to 456 million dollars, from 7.3 billion a year earlier. With tourism performing well, the current account registered a surplus in August for the first time since September 2015, followed by another surplus in September.

Since September, the lira has been recovering, although not yet to where it was in January. If it plateaus out at a lower level, the beneficial effect on foreign trade may not be merely temporary.

Impacts

• Production may not leap back immediately, although imports of capital and intermediate goods are stabilising after the shock in August.
• Imports for consumption are still down, with consumers deferring purchases of such goods as imported automobiles.
• Exports also faltered in August, but the main categories have now surpassed the July figure, being more or less price-competitive.
• The state of US-Turkish relations will influence which way the lira goes now.