Turkey’s foreign trade deficit has surged beyond $45 billion so far this year, data showed on Thursday, as fallout from the pandemic extended the economy’s worst slump in President Recep Tayyip Erdogan’s nearly two decades in power.
The sharp trade imbalance, including a jump of $5 billion in November alone, approached the $55 billion deficit logged in 2018, when a currency crisis marked the end of years of hot economic growth fueled by cheap foreign credit.
Since mid-2018, year-on-year growth has averaged roughly 0.5% due to a roller-coaster of recession, strong recovery and another deep contraction in the second quarter of 2020, when the economy was mostly shuttered to curb COVID-19.
Before that, steady annual growth of around 5% economic growth that propelled Erdogan to five straight election wins, the last in 2018. But since then, the lira has halved in value.
This year alone, it has lost nearly 20% against the dollar, the second worst performance among emerging market currencies - despite rallying in the last two months, since Erdogan overhauled his economic leadership and pledged a new, market-friendly era.
Measures to curb COVID-19, which has killed nearly 21,000 people in Turkey, have slashed key tourism revenues, and record levels of dollarization in a country heavily reliant on imports, have exacerbated the chronic trade deficit.
The deficit in the first 11 months of the year jumped some 83%, the Turkish Statistical Institute said. Exports fell 8.3% while imports rose 3.5%.
Erdogan appointed Naci Agbal as central bank governor in early November, and he has since hiked rates by 6.75 percentage points to contain double-digit inflation.
Erdogan also named a successor to Berat Albayrak, his son-in-law, who abruptly resigned as finance minister in early November. Since then, foreign investor inflows are estimated to have totaled $15 billion.
“With a tight monetary policy stance (and) potentially falling current account deficit, we believe that the nominal strengthening in the lira may linger for some time more and (it) may remain relatively stable during in 2021,” Gedik Investment Research said in a note.
At 0924 GMT, the lira stood at 7.45 to the dollar.
