Exports target cannot be met
Government ministers in Turkey in charge of exporters and foreign trade always complain about the overvaluing of the Turkish Lira; in other words, they want the foreign exchange rates to be higher. However, the foreign exchange rates have reached such a point that even exporters and their ministers have started complaining about the level.
At the end of last week, the Turkish Exporters’ Assembly (TİM) issued the preliminary data for August’s foreign trade. Issuing a statement after this, the economy minister in charge of foreign trade, Zafer Çağlayan, admitted that the target of $158 billion worth of exports was at risk.
We can say that, through this, the economy minister is trying to alter the expectations regarding foreign trade before the end of the year; in other words, he is trying to lower, in advance, the bar they have set. In this way, he is perhaps planning to mitigate the dimension of the disappointment to be experienced and also the troubles it would create.
Çağlayan stated that there were numerous global developments that had jeopardized the target of $158 billion, saying, “While the recession in global demand has been continuing since the beginning of the year, the mobility experienced in the last two to three months in emerging markets has also affected foreign demand negatively.”
He also said, “Those interpretations which say the rise in the foreign exchange rate in Turkey can be considered positive regarding exports are exaggerated.” Çağlayan emphasized that the competitive advantage that has occurred due to the loss in the lira will be relatively small because several other currencies have also lost in value.
Çağlayan also noted that we were going through a phase when export prices were also rising due to the increase in import input costs because of the rise in exchange rates. “When you add to this the tension in the global economy in the past two-three months, we see that foreign demand has been following a weak course in real terms; hence, the remaining months of the year look as if they will be tougher than what we have had up to now.”
In short, it has become apparent in advance that the export targets for this year will not be met. The fact that this confession coincided with a term when exchange rates hit their highest level, I think has also forced exporters to change their traditional “discourse about exchange rates.”
We hope that exporters understand that what is important is not the exchange rate but the competitive power based on production and that they prefer to defend from now on the notion that productivity has to be maintained and that macro equilibriums should be protected in the name of stability.
Balance of payments to be further disrupted
According to TİM data, exports increased only 1.4 percent in August. While exports to the European Union rose 5.8 percent, it proved positive for us that the EU’s imports from the world decreased. Alongside this, exports of agricultural products increased 5 percent while the rise in manufactured products stayed at two per thousand, which, I think, was a serious sign of risk for the future.
The total foreign trade deficit for 12 months reached 60.5 billion dollars at the end of July. Despite this figure, it is apparent that imports have increased at a much higher pace, especially with booming domestic demand. With the data of balance of payments to be disclosed on Sept. 12, the current account deficit is expected to exceed $55 billion as of the end of July. During a period when global capital movements are evolving against Turkey, we should not forget that the increase in current accounts deficit also means that at the same time, foreign exchange rates are increasing.