Turkey has lost export competitiveness, won't meet annual goal: Official

Turkey has lost its competitiveness with exports and the country is on course to fall short of its year-end export target of $267 billion amid high costs and low exchange rates, Turkish Exporters Assembly Chairman Mustafa Gultepe said on Thursday.

The TIM is an umbrella organization representing more than 140,000 Turkish exporters registered under 61 associations and operating in 27 sectors.

The country’s trade deficit widened to $6.44 billion June from $5.33 billion the same month in 2023, with both exports and imports declining, according to official data.

Speaking at TIM’s mid-year event, Gultepe said Turkey had “largely lost” its competitiveness with exports, especially in labor-intensive sectors. He said the main reason was high costs fueled by breakneck inflation as well as low exchange rates of the Turkish lira against the US dollar.

"There is an over 100% increase in costs over the past year, while the increase in the dollar exchange rate remained at 25%," Gultepe said. "Therefore, we can't set prices in many fields."

"In this period, when demand is also narrowing, our exports have gotten trapped in the clamp of high costs and low exchange rates," he added. "It seems difficult for us to even reach the $267 billion target we envisaged for 2024."

The official said that Turkish exports would likely be $264-267 billion for 2024. Gultepe added that he hoped that the disinflation period over the final quarter of the year would lead to economic policy that prioritizes export competitiveness that could lead to double-digit growth. 

On July 3, Turkey’s annual consumer inflation cooled for the first time in eight months, prompting Turkish Finance Minister Mehmet Simsek to declare on the X platform that “the disinflation process has begun.” Inflation was 71.6% in June after hitting an 18-month high of 75.45% in May, according to official data.

Gultepe called on the Turkish government to lift any obstacles to exports as soon as possible. "Exports are the most effective way of combating inflation without cooling the economy,” he added.

The exports chief also said the current rate of about 33 liras to the dollar was lower than it needed to be. He added that to boost Turkish export revenues, the exchange rate should be parallel to inflation, with the gap between them not exceeding five points. 

Earlier this week, Turkey received a welcome boost to its exports sector when China’s BYD, the world’s largest electric vehicle firm, agreed to invest $1 billion to set up a manufacturing plant in Turkey that will churn out up to 150,000 vehicles a year. Turkey plans to be a major exporter of electric cars to the European market. BYD sells around 3 million electric vehicles a year but is hampered with high export costs to the European Union. Manufacturing them in Turkey will help them avoid these costs.