What's behind Turkey's ballooning trade deficit

Synopsis

As Russia's invasion of Ukraine grinds on, its impact continues to be felt far beyond Ukraine's borders, particularly in Turkey. The war has severely affected President Erdogan's economic ambitions, leading to a ballooning trade deficit. In July, Turkey's monthly trade gap reached nearly 11 billion dollars, a record level. From January to July, the trade imbalance increased by 144% compared to the previous year, according to Turkey's state statistics agency. The rapid depreciation of the lira exacerbates the situation, making it difficult for Turkey to capitalize on its weak currency to boost exports. Professor Adel Yarchin from Constance University of Applied Sciences highlights that while global rising import volumes due to increasing oil and gas prices play a role, the Turkish government's unconventional monetary policy significantly contributes to the widening trade deficit. Despite these challenges, there are no signs of a policy change from Turkey's leadership.