Turkey’s foreign trade shortfall contracted by 9% y/y to stand at $5.5bn in June, national statistics office TUIK reported on July 31.

On July 2, initial data from the customs and trade ministry pointed to Turkey’s foreign trade deficit shrinking by 9% y/y to $5.51bn in June.

With the figures, a contraction in Turkey’s foreign trade shortfall has been recorded for the first time since June last year.

The initial sign of re-balancing came in May when growth in the year on year foreign trade gap figure fell sharply to 6% thanks to the fast depreciation experienced by the Turkish lira during the month. The trade deficit widened alarmingly across the first four months of 2018.

Analysts digesting the latest trade figures will also note that the manufacturing PMI index for Turkey pointed to a third straight month of contraction, running from April to June.

Also according to the TUIK data, the foreign trade deficit grew 32% y/y to $41bn in H1.

Exports were up 6% y/y to $82bn in the first six months of 2018 but imports rose at the higher pace of 14% y/y to reach $123bn.

The latest data from TUIK also confirmed that imports of consumer goods fell by 14% y/y to $2.17bn in June.

Imports of intermediate goods also fell by 2.5% y/y to $13.7bn in the month, as a sign of the beginning of a correction in manufacturing activity. Across H1, imports of intermediate goods rose by 16% y/y to $93bn due to overheating economic activity in the first four months of 2018.

Fears over Turkey's overheating economy have strengthened over the sucking in of imports caused by the credit-fuelled economy. Turkey has one of the worst current account deficits in the world. Together, the June data on foreign trade and the PMI figures could be straws in the wind evidencing a slowdown in economic activity.

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 quicker 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.