Richard Melson

September 2006

Yapi Kredi Bank Turkey

yyucel@ykb.com

http://www.ykb.com/tr/default.shtml

FOREIGN TRADE DEVELOPMENTS: January-July 2006

The surge in exports since May continued in July with a significant 19.2% growth compared to the same month of 2005. Imports, on the other hand, did not cut pace and grew by 19.3% in the same period. In fact, following the financial turmoil in May and June, we were expecting a more pronounced moderation in imports, which was expected to stem from weakening domestic demand, namely consumption and investment. Nevertheless, the figures invalidated this expectation. The robust export performance feeds intermediate goods imports, while high international oil prices continue to contribute significantly to the total import bill. Moreover, no change seems to have taken place in the robust growth of consumption goods imports in the last months.

In more detail, exports amounted to USD 6.9 billion in July. As for August, the data from Turkish Exporters’ Assembly exhibiting a 27% growth shows that there has been no change in the robust performance of exports recently. Iron and steel exports, which had stagnated at the beginning of the year due to slackening demand from China, began to increase at very high rates after June, becoming again one of the major export items.1 As usual, best performing sectors were automotive and machinery manufacturing sectors, while high commodity prices probably led to the sharp increases in precious stone and product, mineral fuel and oil exports. In terms of country groups, better-than-expected EU growth definitely affected exports positively. Namely in July, the contribution of the EU and other European countries amounted to 14.7 percentage points, while out of 13% growth of total exports in January-July period, 10.4 percentage comes from the EU and other European countries.

Examining imports closely, it is observed that except for the decelerating investment goods imports, there has been no change in the existing trends, where both the intermediate and consumption goods imports were strong and the international oil prices led to substantial increase in oil imports. Imports of intermediate goods rose by 22.7% in July, of which 5.2 percentage points emanated mainly from the increase in the raw oil, natural gas and refined petroleum imports. High international commodity prices were also reflected in the significant rise in the iron and steel imports, as well. Moreover, imports of consumption goods rose by 23.3% in July, bringing the cumulative growth in this category to 30.6%. More specifically, the details of consumption goods’ imports reflect that the growth in automobiles decelerated significantly, whereas in durable and semi-durables it is early to say a deceleration has started.

The slowdown in imports of investment goods is quite marked in the last few months. With the 2.8% growth in July, the increase in this category in the January-July period amounted to 12.1%.

To sum up the figures in the first seven months of 2006, exports grew by 13%, bringing the cumulative exports to USD 46.5 billion, while imports rose by 18.8%, amounting to USD 76.9 billion. The exports to imports ratio declined from 64% to 60%. In the rest of the year, the robust performances in exports and imports are expected to be maintained. As the international oil prices continue to be high, the oil import bill will constitute an important part of total imports in the coming months as well.

FOREIGN TRADE FIGURES

(USD million)

Jul.

2005

(I)

Jul.

2006

(II)

% change

(II)/(I)

Jan.-Jul.

2005

(III)

Jan.-Jul.

2006

(IV)

%

change (IV)/(III)

Exports

5 763

6 868

19.2

41 148

46 485

13.0

Imports

9 596

11 448

19.3

64 691

76 879

18.8

Capital goods imports

1 687

1 735

2.8

10 968

12 297

12.1

Intermediate goods imp.

6 785

8 328

22.7

46 233

54 948

18.9

Consumption goods imp.

1 072

1 321

23.3

7 173

9 365

30.6

Foreign Trade Balance

- 3 833

- 4 580

19.5

- 23 542

- 30 394

29.1

Exports/Imports (%)

60

60

-

64

60

-

Attached below you will find an analysis of July foreign trade figures.

Kind regards.

Yelda Yücel

Senior Economist

Strategic Planning and Research

Yapi Kredi Bank

Phone: +90 -212 339 71 23

Fax: +90 -212 339 61 30

yyucel@ykb.com

YKB Research: Economic Agenda –

Signs of moderation in trade deficit is still weak

Attachment: ea_foreigntrade_010906.doc (0.51 MB)

AYÇIN YELDA YÜCEL KARABOĞA yyucel@ykb.com

yyucel@ykb.com

Friday, September 1, 2006