What Lies Beneath?

If you are looking for the culprit of Turkey's trade deficit, the figure below may give you a clue... Keep in mind that the economy contracted significantly in 1994, 1999, and 2001.

It's the oil, stupid!

Turkey has been experiencing a significant trade deficit since 2003. Is it because the country imports too much and/or exports too little due to appreciation of the local currency?

Two tables below explain the problem. The main culpit is the high energy prices. The ratio of manufacturing exports to intermediate goods has never been higher. Ditto for the export/import ratio -- IF ONE EXCLUDES ENERGY BILL.




If there we no change in the energy prices, the ratio of exports to imports would be much better:

Figure: The ratio of exports to imports under 2000 prices

The Outlook

The graph below depicts the 3-month moving average changes in exports, imports, and industrial production.

Following the interst hikes of the Central Bank in June, there are signs of slowdown in consumption. The industrial production piked in July and has been gradually lost momentum ever since. If the exports remain strong, the economy may end up with a 5-6 percent growth for the second half of the year. Otherwise I expect a 3-4 % growth.