Turkey’s Trade Deficit Widens Amid Efforts to Attract Hard Currency

Turkey's trade deficit widens amid efforts to attract hard currency. (Reuters)
Turkey's trade deficit widens amid efforts to attract hard currency. (Reuters)
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Turkey’s Trade Deficit Widens Amid Efforts to Attract Hard Currency

Turkey's trade deficit widens amid efforts to attract hard currency. (Reuters)
Turkey's trade deficit widens amid efforts to attract hard currency. (Reuters)

Turkey’s trade deficit surged 75% year-on-year in March to $8.17 billion, mainly due to a 30.7% rise in imports, data showed on Friday.

According to the Turkish Statistical Institute, exports climbed by 19.8% to nearly $22.71 billion versus imports of around $30.88 billion.

Turkey has launched a new economic program aimed at achieving a surplus in the current account balance by increasing exports while maintaining low interest rates, albeit at the expense of inflation, which has hit record highs.

The Turkish central bank revised up its inflation forecasts for this year and next mainly because of the rise in commodity prices and supply issues.

A presentation by Governor Sahap Kavcioglu on Thursday showed inflation peaking around 70% before June and falling to single digits by end-2024.

Export-driven growth and current account balance are important for price stability, Kavcioglu said, adding that Turkey’s economy is seen expanding seven percent in Q1 2022.

Meanwhile, Turkey is working on a plan to attract inflows of hard currency by offering lira funding, free of interest and with a guaranteed four percent return in dollars, to foreign investors willing to park their money for at least two years.

Under the plan, the central bank would provide lira liquidity to foreigners for investment in local bonds with a maturity of at least two years, according to a person with direct knowledge of the deliberations.

Besides extending zero-yield swaps, the monetary authority would also guarantee a four percent return in dollar terms when the securities mature, the person said.

After a currency crisis in 2018, Turkey introduced numerous restrictions on foreign transactions to defend the lira, placing limits on swaps with local banks to deter short sellers.

But as a side effect, foreign holdings of Turkish stocks and bonds have fallen to a historic low.

Deep trade imbalances and the world’s most negative, price-adjusted interest rates have increasingly put the $800 billion economy at risk as global tightening escalates, led by the US Federal Reserve.

Instead of using higher interest rates to make lira assets more attractive, Turkey has introduced a series of unconventional policies to attract hard currency and boost central bank reserves.

Deposits in hard currency protected accounts reached 782 billion lira ($52 billion) as of April 22, according to banking watchdog data.

The central bank also reviewed this month some of the reserve requirements controls at banks in an attempt to encourage the conversion of foreign currencies into the local currency.



Gold Gains on Safe-haven Demand as Trump Expands Trade War

FILE PHOTO: An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo
FILE PHOTO: An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo
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Gold Gains on Safe-haven Demand as Trump Expands Trade War

FILE PHOTO: An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo
FILE PHOTO: An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo

Gold prices rose for a third straight session on Friday, as US President Donald Trump's announcement of new tariffs on Canada and broader tariff threats against other trading partners lifted demand for the safe-haven asset.
Spot gold was up 0.5% to $3,339.99 per ounce, as of 0755 GMT. US gold futures gained 0.8% to $3,351.
"We're seeing some growing demand for gold as a haven. There are investors looking for some safety asset despite stock markets hitting highs. And any dip in gold is seen as a buying opportunity now," said Carlo Alberto De Casa, an external analyst at Swissquote.
On Thursday, Trump said US would impose a 35% tariff on imports from Canada and planned to impose blanket duties of 15% or 20% on most other trade partners, Reuters said.
This follows Wednesday's announcement of a 50% tariff on US copper imports and a similar levy on goods from Brazil, along with tariff notifications sent earlier to other trading partners.
Trump also said the European Union could receive a letter on tariff rates by Friday, throwing into question the progress of trade talks between Washington and the 27-nation bloc.
"Rising trade tensions have reinvigorated demand for haven assets such as gold amid the prospect of an economic slowdown. The more dovish Fed is also boosting investor appetite," analysts at ANZ wrote in a note.
Data on Thursday showed weekly jobless claims in the US fell unexpectedly to a seven-week low, indicating stable employment levels.
Federal Reserve Governor Christopher Waller on Thursday reiterated his belief the central bank could cut interest rates at its policy meeting later this month.
Meanwhile, Fed Bank of San Francisco President Mary Daly said two rate cuts remain on the table for this year.
Lower rates boost non-yielding gold's appeal.
Elsewhere, spot silver rose 0.9% to $37.37 per ounce, platinum fell 1% to $1,346.81 and palladium climbed 1.3% to $1,156.44.