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Tuesday, July 31, 2007

Turkish Trade Gap Widens

From Bloomberg:

Turkish June Foreign Trade Gap Widens for 2nd Month

By Steve Bryant

July 31 (Bloomberg) -- Turkey's trade deficit widened 18 percent in June from a year earlier, the second consecutive increase, as industry drew in raw materials for manufacture of products to export.

The trade gap grew to $5.5 billion from a revised $4.7 billion in the year-earlier period, the statistics agency in Ankara said on its Web site today. The deficit was forecast to be $4.8 billion, according to the median estimate of 13 economists surveyed by Bloomberg.

Today's figures follow a widening in the trade gap in May for the first time since November and suggest Turkey's current-account deficit, the widest measure of trade in goods and services, may be rising again after six months of stabilization.

``Turkey is addicted to intermediate goods,'' said Sengul Dagdeviren, an economist for Oyak Bank AS in Istanbul. ``It's clear that if the economy picks up, we'll start seeing even larger problems in the trade deficit.''

Exports increased 14.2 percent to $8.9 billion in June, after hitting a record $9.1 billion the previous month, the statistics agency said today. Imports increased 15.6 percent to $14.4 billion in June from the year-earlier period, the agency said.

Imports of raw and unfinished goods, which include oil, steel and machinery, rose 15.8 percent over the period to $10.4 billion. Consumer imports were little changed from the previous year at $1.5 billion, the agency said.

European Goods

Growth in Europe is boosting Turkish exports of goods such as washing machines as cars. The country needs to import raw materials to fuel its export industries.

``The high import dependence of Turkish exports implies that any export strength is accompanied by higher imports,'' Yarkin Cebeci, economist for JPMorgan Chase & Co. in Istanbul, wrote in a note to investors.

Crude oil prices rose to more than $70 a barrel at the end of June from $64.50 at the start of the month.

Turkey imports most of its energy, and higher oil prices mean the current-account deficit may widen this year as a percentage of gross domestic product, Moody's Investors Services Inc. analyst Kristen Lindow said in an interview on July 23. Last year's deficit was 7.9 percent of GDP.

The lira gained as much as two percent against the dollar in June and stood 8 percent higher than its Jan. 1 value at the end of June.

Current-Account Gap

Rising energy costs and a possible increase in demand for imported consumer goods means an increase in the current-account deficit in the second half of 2007 would ``not be surprising,'' the central bank said on July 27.

The gap reached a record $31.6 billion in 2006, 37 percent up on the previous year. It narrowed in May for the third consecutive month and stood at $31 billion in the 12 months to May.

Concern for the country's ability to finance the deficit led to a slump in the value of the lira in May last year. The central bank responded by increasing its benchmark lending rate by 4.25 percentage points to 17.5 percent in three moves in June and July last year.

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