Turkish export climate buoyant on improved demand in top markets

The export climate for Turkish manufacturers remained strong in April, a closely watched survey showed Wednesday, pointing to a significant improvement in demand in key export markets.

The Manufacturing Export Climate Index rose to 54.4 last month, according to a survey by the Istanbul Chamber of Industry (ISO). The reading had reached 55.2 in February before retreating slightly to 53.9 in March.

The reading has remained above the threshold level of 50 that separates growth from contraction and marked the 15th consecutive month of strengthening in the export demand.

The improvement in April was backed by the expansion of economic activity in the eight largest markets of Turkish exporters that stemmed from the loosening of coronavirus measures in the eurozone.

This compensated for the difficulties caused by the supply chain disruptions and sharp price increases, the ISO said.

Production growth accelerated in Italy, Spain, France and the Netherlands as of the second quarter. In contrast, the pace of expansion in Germany again fell to the lowest level seen in 2022, it noted.

Although it lost momentum, growth in the United States and the United Kingdom remained at a high pace.

Contraction in Russia

Russia’s invasion of Ukraine has been clouding the outlook and has impacted output in several important markets.

Accounting for about 2% of Turkish manufacturing industry exports, Russia has been the largest market where the production contracted. Its economic activity dropped for the second month in a row, the chamber said, after sweeping Western sanctions were imposed over Moscow’s aggression on Ukraine.

“However, the decline has accelerated compared to March,” the ISO noted.

China was another issue of concern last month, as it saw the steepest decline in production among the markets covered by the survey due to widespread COVID-19 lockdowns across major cities, it added.

China’s economy slowed sharply at the beginning of the second quarter, as authorities in dozens of cities imposed restrictions to stamp out COVID-19 outbreaks, with Shanghai currently in its sixth week of lockdown.

“The decline in production was most pronounced after February 2020 and was recorded at the highest rate among the countries covered by the survey,” the survey said.

Advantage in price competition

In contrast, the strongest expansion in economic activity was recorded in Qatar, which reached the highest growth rate of the more than five-year data series.

Elsewhere in the Middle East, output declined in Egypt and Lebanon, while it continued to increase in Saudi Arabia.

Non-oil economic activity in the United Arab Emirates (UAE) also continued to grow strongly in April, with growth reaching its highest pace since the beginning of the year.

“The continued growth in all the main export markets of Turkish manufacturing industry products means that opportunities remain for companies to take on new jobs from abroad,” said Andrew Harker, economics director at S&P Global.

“Although serious price pressures across the global economy are likely to limit growth, the weakness in the Turkish lira may help firms maintain their relative advantages in price competition.”

The index has been continuing its recovery, which it started after it in April 2020 hit 19.1 due to measures to stem the coronavirus outbreak, the lowest level since the index started to be calculated in January 2002. It rose above the threshold value of 50 for the first time in July 2020.

Turkey’s exports surged 24.6% year-over-year last month to $23.4 billion (TL 358.33 billion), the highest monthly exports ever, according to data from the Turkish Exporters Assembly (TIM).

It followed monthly records in the first three months of the year, a period marked by a widening trade deficit fueled by increasing energy costs.

The war in Ukraine has sent global commodity prices soaring, threatening to impact Turkey’s new economic program that aims to record a current account surplus.

The trade deficit jumped 98% year-over-year in April to $6.1 billion, the data showed, for a total of $32.5 billion in the first four months of 2022.

Energy imports soared 134.1% year-over-year to $7.7 billion, slightly down from $8.4 billion in March, taking a total to $32.7 billion from January through April – equal to an annual rise of 173.1%.

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