Tuesday, July 6, 2010

A couple of acute observations on Turkey's exports

Here's the reader from the previous post in a separate email:
Based on your suggestion, I looked up the TurkSTat figures published today and in the process perhaps I answered my questions. Hope you don't mind if I walk you through to ensure that I am not miscalculating:

May 2009 Exports: 7348 (in '000s USD)
May 2010 Exports: 9885

Export Positive difference in May yoy: $2,537 (000s)

May 2009 Imports: 10,868
May 2010 Imports: 14,719

Import Negative Difference in May yoy: $3,851

May 2010 Leakage(for lack of a better word or deficit): 2,537-3,851 = $ - 1,314

Now let's look a cumulative Jan-May figures:

Cum Jan-May 2009 Imports: $39,387
Cum Jan-May 2010 Imports: $45,546
Cum Jan-May 2009 Exports: $49,866
Cum Jan-May 2010 Exports: $68,125

Jan - May Leakage 2009: $39,387- 49,866 = $ -10,479
Jan - May Leakage 2010: $45,546 - 68,125 = $ - 22,579

My quick observation is that Turkish rise in exports comes at a price (Leakage). Therefore, even though increases over base sound impressive there is a price to be paid in terms of current account deficit. If the leakage so far is $22.5 billion, we are looking at perhaps $54 billion deficit (import-export @ the present rate). If global economy has a downturn (a weaker second half) then maybe deficit even higher.

That's my rudimentary take. What do you think?
The reader is right on target; basically, Turkey has to import to export; meaning that it needs to import a lot of intermediary products and machinery to exports. If you are interested, there are a couple of CBT papers that discuss this issue in detail.

Anyway, she makes another point in a later email:
You may also find this of value:


I found the observation of "most Turkish exports are denominated in euros and most Turkish imports in USD" to be another fascinating intricacy. It would appear that Turkey needs a strong euro if she is to tackle the current account deficit effectively (but I will yield to your interpretation since you are the expert in this field).
Again, she is right, and as I always say, a picture is worth more than a thousand words:
I love the mirror-image nature of both exports and imports:)
So you need a euro strong against the dollar, but weak against the lira. Now, you tell me: Is this too much to ask for?:)

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