Turkey’s foreign trade deficit declined by 32% y/y to $6bn in July, preliminary data from the customs ministry showed on August 1.

In June, a contraction in Turkey’s foreign trade shortfall was recorded for the first time since June last year. It shrank by 9% y/y. The July data confirms an acceleration in the pace of the re-balancing seen in the Turkish economy.

Exports rose by 12% y/y to $14bn while imports fell 6% y/y to $20bn.

The latest trade data also showed that imports of consumer goods fell by 15% y/y to $2.03bn in July while intermediate goods imports fell 4% y/y to $15.2bn and capital goods imports declined by 9% y/y to $2.78bn.

On the back of the July data, the foreign trade deficit widened 17% y/y to $47bn for January-July. Exports increased by 7% y/y to $96bn and imports were up 10% y/y to $143bn.

Anxieties over Turkey's overheating economy had strengthened after imports were sucked in by the credit-fuelled economy. Turkey has one of the worst current account deficits in the world. Together, the July data on foreign trade and the PMI figures are likely straws in the wind indicating a slowdown in GDP growth, starting from Q2, is ahead.

Turkey's economic health is dangerously reliant on hot inflows of foreign external financing to enable growth. The political and economic outlook in the country is not secure enough to attract sufficient longer-term stable foreign investment capital.

Turkey’s current account deficit rose by 59% y/y to $27.7bn in January-May, the central bank announced on July 11.

The foreign trade deficit rose by 37% y/y to $77bn in 2017. Exports were up 10% y/y to $157bn but imports rose at the faster pace of 18% y/y to reach $234bn.

The government is forecasting a foreign trade deficit of $68bn for 2018 with exports reaching $169bn and imports amounting to $237bn.