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Analysis: Turkey’s Trade Deficit Widens as Strong Demand Challenges TCMB Tightening

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ISTANBUL, November 29, 2025 — The latest analysis from Akbank on Turkey’s October 2025 foreign trade data suggests that the widening deficit, which hit a four-month high, is primarily a consequence of robust domestic demand and persistent investment activity. This trend puts pressure on the efficacy of the Turkish Central Bank’s (TCMB) ongoing monetary tightening policy aimed at cooling the economy.

💰 Deficit Hits $7.58 Billion: Import-Led Strain

 

Akbank’s assessment points out that the overall trade deficit grew by 27.6% year-on-year to $7.58 billion in October. The main driver was the significant outperformance of imports, which grew by 7.2%, substantially overshadowing the moderate 2.0% increase in exports.

Key Drivers of Import Growth:

 

The analysis emphasizes that the strength in imports reflects economic activity rather than pure consumption:

  1. Surging Capital Goods: Imports of capital goods recorded an increase of over 20% year-on-year. This is interpreted as a strong signal that businesses are continuing to invest heavily in machinery and capacity expansion, indicating sustained confidence in future production despite high interest rates.

  2. Resilient Intermediate Goods: Imports of intermediate goods (raw materials and components), which underpin the manufacturing sector, remained strong. This confirms the resilience of Turkish industry but also its high reliance on foreign inputs, maintaining pressure on the currency.

  3. Consumption Cooldown: The only encouraging sign for the TCMB was a decline in consumption goods imports, suggesting that the tight monetary policy may be starting to successfully curb household demand for finished products.

🪙 Gold and Energy Pressure Persists

 

The analysis highlights that while the core trade deficit (excluding energy and non-monetary gold) is much smaller, two volatile items continue to distort the headline figure:

  • Gold Imports remained high at $2.8 billion, driven by domestic demand for the metal as an inflation hedge and store of value.

  • Energy Imports also contributed significantly to the overall $7.58 billion gap.

🎯 Implications for TCMB Policy

 

The October data provides strong validation for the Central Bank’s cautious approach:

  • Demand Resilience: The persistent high demand for investment (capital goods) and production inputs (intermediate goods) suggests that domestic demand is proving more resilient than anticipated. This indicates the TCMB must maintain its tight monetary stance to achieve its goal of suppressing internal demand and easing inflation.

  • External Vulnerability: The sustained widening of the trade deficit compounds the year-to-date deficit, which has reached $74.68 billion. This level of imbalance increases Turkey’s reliance on external financing, keeping the Current Account Balance vulnerable and posing a risk to Lira stability.

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