There is strong evidence that the downturn has not stopped in the fourth quarter as argued by officials and that the slowdown has been continuing.

On Thursday, foreign trade statistics for April were announced. I will evaluate import figures in reference to the estimates for 2012 growth. Pace of increase in total imports has been decreasing since September 2011. In the last three months, imports decreased year-on-year. There appears a similar trend in non-energy exports, as well. The only difference is that year-on-year drop in non-energy imports has been continuing for the last five months. Sub-components of imports depict a picture alike where the drop in April is stronger than that in previous months for all of the three sub-components of imports. In addition, it is seen that the annual decrease in the import of investment and consumption goods has started before that in intermediate goods. 

Does the slowdown continue?

Approximately one-third of Turkey’s imports are in Euro terms while the above statistics are in Dollars. Lately, Euro-dollar exchange rates have been fluctuating significantly. Therefore, adjusting figures to the exchange rate movements can enable a better understanding of import accounts. However, the picture does not change after adjustments either: the annual pace of increase in imports has been decreasing since September 2011; Euro imports has been dropping year-on-year in the last six months while Dollar imports has dropped only in April.

What does these statistics imply for Turkey’s growth? Before answering this question, let’ compare annual GDP growth figures with annual growth of non-energy imports. Figure 1 does this comparison for the period between the first quarter of 1998 and 2012. The message it delivers is crystal-clear: there is a close relationship in the same direction (the latest available GDP figure is for 2011 quarter four) between GDP growth and import growth. Figure 2 shows annual change in non-energy imports for January 2011-April 2012. Please note that imports decreased in all periods of economic contraction (the Russian crisis of 1998-99, the 2001 crisis and the global economic crisis of 2008).

With this perspective, the analysis of the above summarized import statistics underscore two points. First is that Turkey’s economy has been slowing down considerably. This is a well-known fact as signaled by other economic indicators. But there also is something new: there is strong evidence that the downturn has not stopped in the fourth quarter as argued by officials and that the slowdown has been continuing.

Figure 1: GDP and non-energy import, annual % increase: 1998.I - 2012.I (right axis: GDP). Source: TURKSTAT

Figure 2: Non-energy imports, annual % increase: January 1997 – April 2012. Source: TURKSTAT

This commentary was published in Radikal daily on 02.06.2012