November trade performance requires further monetary tightening

Turkey’s trade deficit widened to USD 5.07 bn in November from last year’s USD1.99b according to preliminary Trade Ministry data.  The trade deficit hence skyrocketed by 150% in a year’s time.

November exports down by 1% yoy to USD 16.1 bn contrasts heavily with the 16% yoy jump in imports; the by product of credit fueled GDP growth. Hence, the export-import coverage rate has dramatically declined to 76% from 89% a year earlier.

The November trade figures place Turkey’s January-November 2020 trade deficit  to USD 45.3 bn , widening by 83% yoy.

The roughly 75% decline in Turkey’s tourism income combined with loss of competitiveness in the export markets despite the TL weakness combine to create roughly 4% CAD to GDP ratio this year.  The central bank rate hike seems to have worked little as of November while the economy is cooling down from excessive domestic demand growth as a result of excessive subsidies given in the form of cheap lending by state banks mostly.
These will mean the central bank would have to tighten further at its December MPC to cap the import growth when exports are down mainly due to lockdown measures across the Europe.