August 3, 2012 9:39 am by David O'Byrne
At first glance, newly released figures for Turkeys foreign trade suggest the countrys economy is holding up well despite the travails of its neighbours in Europe.
But as ever the devil is in the detail and hidden away in the numbers are some more uncomfortable indications that darker days lie ahead for the Turkish economy.
Figures from TUIK, the statistics office, show a 30 per cent reduction in Turkeys trade deficit, from $10.3bn in June 2011 to $7.2bn in June this year. Other figures from TIM, the Turkish exporters association, show exports for the 12 months to July reaching $142.6bn, a healthy 12.3 per cent up on the previous twelve months.
Taken together, the two sets of figures could suggest continued success for Turkeys exporters, while Turkish consumers have reined in their love of expensive imported goods.
But dig a little deeper
To begin with, according to TIMs figures for July, Turkish exports for the month actually fell by 5.5 per cent over July 2011 while both TIM and TUIK show worrying falls in exports to Turkeys core European markets.
According to TUIK, Turkeys exports to the EU dropped from 48.2 per cent of the total in June 2011 to only 37.1 per cent this year. TIMs data suggest a drop from 47.7 per cent in July last year to 40.3 per cent.
According to TIM, the bulk of the fall came in two keys sectors: automotive, which saw exports in July plunge 22.3 per cent; and ready-to-wear textiles, where exports in July fell by 12 per cent.
While the two organisations collate their figures in different ways the outlook is clear: as Europe continues to sneeze, Turkey will catch a cold.
The picture is more worrying when the effect of the weakening euro is taken into account, an effect which economy minister Zafer Caglayan estimates cost the country $550m in July alone.
So far so bad. But according to Ozgur Altug, chief economist at Istanbuls BCG Partners, the real bad news is hidden not in weakening export figures but in the falling import figures which helped contribute to fall in the trade deficit and to a reduction Turkeys current account deficit from $77bn a year ago to $67bn by the end of May this year.
Altug points out that Turkeys dependence on imported energy remains the chief culprit behind its current account deficit woes. Despite falling oil prices, the 12 month rolling energy balance rose to $51.4bn by the end of June this year, compared with $47.8 at the end of 2011, he says. The government has been successful in rebalancing the economy but the structural problems such as the growing need for imported energy are still there.
Altug warns that an improvement in the non-energy trade deficit is also illusory. He points to an 11 per cent drop in imports of intermediate goods over the first half of this year and a 16 per cent drop in consumer goods over the same period.
Both, he suggests, are a direct result of slower GDP growth, with the former suggesting a drop in imports of capital goods used to expand output, the latter indicting declining consumer confidence. The root problem, he suggests, is Turkeys failure to capitalise on years of rapid economic expansion to increase the contribution of exports to the overall economy.
Despite the growth, the ratio of exports to GDP has remained almost level at 16-18 per cent for the past 11 years, he says, pointing out that the average for a BB-rated country is 32 per cent and for a BBB-rated country 42 per cent. By the end of this year Turkey may see a further deterioration in both its foreign trade balance and it scurrent account deficit.
All of which leaves the government of Recep Tayyip Erdogan with some tough decisions.
Hellas, Hellas, n tav n epi tas