At around the ‘fair value’: USD/TRY 5.5 and the balance of payments
► Rebalanc ng has begun. In fact, external balances d splay a remarkable mprovement. On top of August, September data has conf rmed our v ew that what has been go ng on had noth ng to do w th a balance of payments cr s s. Furthermore, prel m nary October f gures also shore up th s development. It s now a trend. Turkey’s balance of payments s n the process of re-equ l brat on.
► Exports rose by 22.4 percent and reached $14.5 b ll on whereas mports contracted by 18.3 percent and posted $16.3 b ll on. Th s amounts to a fore gn trade def c t of $1.9 b ll on only. ► The fall n mports s rem n scent of the post-Lehman per od but exports, as the graph c dep cts, d dn’t fall n tandem as happened then. Hence, the def c t narrowed steeply and the export/ mport coverage rat o moved north.
► Not only s t not, nor ever was, a balance of payments cr s s, but also the balance has turned nto a pos t ve. There w ll be another CAD surplus n September.
► Turk sh Exporters Assembly (TEA) October data put further emphas s on the new trend. Indeed, n October, monthly exports set a record, reach ng $15.7 b ll on. S nce the newly-adjusted TEA data follow the TURKSTAT data more closely, we can take th s f gure as a quas -off c al release. ► All trad t onal export sectors performed well, after the August setback, and obv ously there s rebalanc ng. Th s w ll be the theme for 2019. True, mports fell because econom c act v ty s so slow that t borders recess on, but exports rose beyond that.
► Except ng a temporar ly eng neered domest c demand rev val ahead of local elect ons, th s s the pattern we ought to ant c pate go ng forward n 2019 and poss bly even n 2020.