Turkey's trade deficit narrows by 25 pct

ANKARA

Turkey's foreign trade deficit narrowed by more than a quarter last month as exports rose and energy costs fell, the Turkish Statistical Institute (TurkStat) said Thursday.

The 25.5 percent year-on-year fall saw the deficit drop to $5.05 billion in May from $6.79 billion a year earlier.

The month saw exports rise by just under a percentage point to $12.14 billion while imports fell to $17.19 billion, a 3.8 percent decline, the TurkStat report said.

KapitalFx Analyst Enver Erkan said the rise in exports was likely to be negatively affected by Britain’s decision to leave the EU.

“Britain climbed to first place for Turkey’s export destinations in May, which will lead to negative effects on the export volume because of the Brexit,” he said.

In May, Turkey exported $1.3 billion worth of goods and services to Britain, followed by Germany ($1.1 billion) and Iran ($673 million), according to TurkStat.

It imported $2 billion worth of goods and services from China, the largest importer.

Erkan said last week’s vote for Britain to leave the EU will cause an economic slowdown in Europe and the U.K. and domestic demand across the EU is likely to decline significantly.

“Turkish exports will be affected negatively,” he said. “The declining trade deficit is caused by changes in global prices, especially commodity and energy prices. On the other hand, we will watch the effects of softening relations with Russia and Israel.”

This week, ties with Moscow and Tel Aviv improved as Turkey revived links with Israel following a six-year hiatus resulting from the killing of Turkish activists by Israeli forces and Russia's Vladimir Putin eased sanctions imposed following the shooting down of a Russian warplane by Turkish fighter jets last November.

Erkan forecast a $63 billion trade deficit and a $33 billion current account deficit for 2016.

In the first five months of the year, exports fell by 4 percent while imports dropped by 9.5 percent resulting in a 21 percent fall in the foreign trade gap to $21.3 billion.

Turkey is heavily dependent on energy imports but its energy costs continued to fall amid low oil prices. Energy spending stood at $10.6 billion in the five months, a drop of $6.4 billion from the same period in 2015.