Turkey's Trade Deficit Jumps, Lira Continues to Slump
Turkey’s trade deficit has reached a record high level as the Turkish lira exchange rate continues to drop reaching seven liras threshold per dollar, forcing the Central Bank to continue pumping foreign currency.
The foreign trade deficit increased by 73.2 percent reaching $23.87 billion between January-June 2020 compared to 13.7 billion during the same period in 2019, a statement by the Turkish Statistical Institute (TurkStat) read on Wednesday.
The coronavirus pandemic has affected Turkey’s trade revenues due to lockdown and decline in demand. Meanwhile, both export and import figures decreased by 15.1 percent and 3.2 percent respectively in H1 2020.
During this period, exports reached $75.2 billion while imports stood at $98.9 billion compared to same period in 2019. This has led to a 8.7 percent in H1 2020 decline in Turkey’s foreign trade, amounting to $173.9 billion drop from $190.5 billion in the corresponding period in 2019.
The Turkish lira lost again 1.79 percent of its value in Wednesday’s trading, dropping to its lowest level since mid-May, when it was traded at 6.98 liras per dollar.
Amid a wave of sales ending a two-month lull, analysts said it was the result of expensive interventions by the government in the currency market. According bankers and analysts, the cost of intervention in the exchange rate has amounted to $100 billion used to support the Turkish currency.
The Central Bank pumped two billion dollars in just two days to control the lira’s exchange rate.
The Ministry of Treasury and Finance sold about $1.3 billion during Monday's transactions, then $600 million during Tuesday’s first hours of trading, amid reports that the three government banks also sold about $1 billion a day.
The government was able to control the exchange rate at an average of 6.85 liras per dollar in June. However, experts say Turkish officials are trying to fix the lira’s value at a specific rate, warning that these actions could shoulder the state extra burdens.