The foreign trade deficit came to USD7.3bn in October, while the 12M rolling deficit that has been gradually increasing since early 2017 stood at USD71.0bn, the highest in more than two years.
12M Trade balance (USD bn)
Imports strength contribute to widening
Imports maintained double-digit growth at 25.0% year-on-year vs continuation of the healthy increase in exports by 9.0% YoY.
We saw a sharp 74% widening in the merchandise trade deficit vs the same month in the previous year, translating into a coverage of imports by exports on a 12M rolling basis at 68.5% following a downtrend in the last seven months.
All in all, core trade deficit (excluding gold and energy) maintains widening, thanks to the impact of robust domestic demand, while less supportive net gold trade and a growing energy bill have also contributed to the expansion in the monthly deficit.
Coverage of imports by exports
12M rolling (%)
Evolution of core exports and imports (%)
Capital goods imports remain weak
In terms of broad economic classification, intermediate goods continued to be the significant driver of imports, up by 35.2% YoY, while capital and consumption goods recorded modest increases at 2.8% YoY and 8.3% YoY, respectively.
Since March, YoY growth rates in monthly capital goods imports have remained in the negative territory, hints at relatively weak investment appetite, despite strong recovery in economic performance
Automotive contribute the most to the export growth
Looking at foreign trade by the top 20 chapters, all major export items, with the exception of gold and cotton recorded positive growth rates, showing a continuation of strong performance this year. Automotive was at the top in terms of contribution to the growth, underpinned by better EU demand, followed by boilers and machines and iron and steel.
On the imports side, only gold imports contracted among top 20 items, while a rising energy bill and contributions from iron and steel and electrical equipment imports were the major drivers of headline growth. Worth noting is the significant deterioration in net gold trade on a 12M rolling basis that turned into a deficit in June for the first time since December 2014, and fell further in the last four months, with strength in imports.
EU stands out as the major export market
Exports to the Middle East and North Africa (MENA) region declined to 24.2% on the back of adverse geopolitical developments in the region. On the flip side, the share of exports to the EU recorded a gain, standing at 49.5% vs 48.4% in the same month of 2016. In October, UAE, US, Spain and Germany were the countries that contributed to exports the most, while Iran, UK and Iraq witnessed sizable declines.
Overall, cyclical developments have continued to determine external balances. In the near term, export strength due to EU demand and additional price competitiveness from the TRY slide as well as expected softening in domestic demand with fading credit stimulus and reversal of some fiscal measures will likely limit the pace of widening while energy prices will remain as one of the key variables that determine the level of external deficit.