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2.4​ ​Import compression and capital controls
April did not bring the hoped for contraction in the trade deficit as exports fell 42% y/y to $8.4bn while the contraction in imports was relatively limited at 32% y/y to $11.8bn. That brought the trade deficit to $3.4bn, up 13% y/y.
Imports of investment goods fell 8% y/y to $1.83bn in the month while intermediate goods imports were down 37% y/y to $8.79bn and consumption goods imports contracted 15% y/y to $1.2bn.
Additional tariffs were targeted at consumption goods last month and the first days of May saw tariff hikes on intermediate goods.
Turkey’s oil imports in April fell sharply to a value of $908mn—making oil the fourth largest import item—from $3.51bn a year ago. Oil has traditionally been the largest import item for Turkey, which is almost entirely reliant on imports to meet its energy needs, but the oil price crisis that has arisen in tandem with the COVID-19 emergency has pushed it down the ranking.
The government sells oil price collapse as justifying the official inflation and current account data but fuel prices for consumers and trade deficit are on the rise.
The largest import item in April was machinery imports worth of $1.41bn, down from $1.88bn a year ago. Machinery imports may fall in the coming months given low capacity utilization rates and cuts in investment budgets.
The second largest import item in the month was consumer electronics worth of $945mn, down from $1.3bn a year ago. The government has introduced tax hikes on these items in April and lira depreciation should also help here.
Iron-steel imports were down to $945mn in April while plastic imports were also down to $866mn.
Erdogan has imposed a new import tariff of 30% on hundreds of goods including dishwashers, freezers, jewellery, musical instruments and sanitary products, according to a presidential decree ​published​ in Turkey’s Official Gazette on May 11.
On May 20, Turkey imposed an additional tariff of up to 30% on more than 800 import items including work and agriculture machinery.
Following that move, Turkish finance minister Berat Albayrak was reported as saying Turkey will make it harder to import goods except for strategic products and those that cannot be produced domestically. “Imports will not be easy,” he was quoted as saying by state-owned Anadolu Agency news service, adding that domestic production will be prioritised and Ankara will implement long-term lira financing programmes for the industry sector.
“[Turkey’s] exports have since [April] collapsed and foreign currency receipts from the tourism sector have dried up. All of this has been exacerbated by large capital outflows,” Jason Tuvey of Capital Economics said on May 11 in a note entitled “Turkey and the rising risk of (another) currency crisis”.
“Import compression currently seems to be the preferred route. In late-April, the government imposed tariffs of up to 50% on imports ranging from textiles to cars. And earlier in May, customs officials were reportedly told to step up physical inspections of all imports before the move was quickly reversed,” he added.
“Meanwhile, the authorities have started to impose soft capital controls. Last
15​ TURKEY Country Report​ June 2020 ​ ​www.intellinews.com