ANALYSIS:  Turkish exports are in trouble, rising rates could cause more damage

By Levent Yilmaz, Yeni Safak Daily


Last Tuesday, TurkStat announced Foreign Trade Statistics for September. Exports decreased by 0.5% while imports slumped by 14.6%. In the light of these data, exports decreased by 0.5% in the January-September period compared to the same period of the previous year, while imports increased by 1.2%. Thus, while the foreign trade deficit was 5.01 billion dollars in September, the cumulative deficit in the January-September rose to 87.2 billion dollars. This figure indicates an increase of 4.9% compared to the same period of the previous year.


Of course, these developments in foreign trade do not augur well. Ankara wants to increase  exports and reduce imports, thus raising the positive contribution of foreign trade in reducing its chronic problem, the current account deficit. However, for such a development to occur, certain conditions must be met simultaneously.


The first of these is the improvement of foreign demand conditions. This issue depends on cyclical developments in the global economy and the internal dynamics of our main export markets. In other words, even if policy is set up correctly at home, it may not be possible to increase exports if there is no foreign demand. For example, the Eurozone, our main export market, contracted in the 3rd quarter of 2023, contrary to expectations. According to the data of the European Statistical Office Eurostat, the regional economy shrank by 0.1% in the July-September period compared to the previous quarter. Moreover, the economy of Germany, the country we export the most to, is currently technically in recession.

The second condition is to be competitive. In this regard, exporters’ expectation is that the exchange rate will increase as much as inflation. However, instead, the issue of being competitive on a product basis should be evaluated in detail. Because one of the Central Bank’s latest studies points to the following fact: The effect of real exchange rate movements on export volume is relatively limited.


Finally, the most important issue is reducing imports for domestic demand. It is obvious that the most important step here is protectionist policies, as many other countries do. If imports aimed at domestic demand do not decrease with tight monetary policies, it is essential that regulations that will reduce imports come into play more effectively.

So where is the manufacturing industry at the export front?

According to TUIK data, the share of the manufacturing industry in total exports is around 94-95%. In other words, the manufacturing industry is the main actor of exports. According to the findings of the CBRT, permanent and sustainable gains in exports should be based on high value-added and technological products. In other words, the manufacturing industry is of great importance not only in terms of data but also strategically when it comes to exports.

Tight credit conditions increase export vulnarability

So, what is the situation of the manufacturing industry’s access to credit? The answer to this question is important in many ways. Because almost all businesses in Turkey are highly dependent on financing, including working capital. So they constantly need credit. Meeting this need is a prerequisite for the manufacturing industry to produce and export. However, for a while, sectors’ access to credit was relatively low due to regulations instituted by former CBRT governor Sahap Kavcioglu. These regulations are being phased out gradually, which would facilitate access to credit. However, soaring commercial loan  rates have become the new source of the problem of access to finance. In other words, there are obvious difficulties in the manufacturing industry’s access to loans.

In summary, due to the expected impact of the speed, dose and content of the tightening program implemented by the economy  management  team on the economy, regulating easier access to finance by deserving firms is more important than ever.


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.