By JOE PARKINSON<\/p>\n
ISTANBUL\u2014Turkey’s trade deficit widened sharply in October, official data showed Tuesday, underlining the emerging economy’s growth but spotlighting an imbalance that analysts say leaves it exposed to external shocks.<\/p>\n
According to the Turkish statistics institute, or Turkstat, the October trade deficit expanded to $6.3 billion from $2.7 billion a year earlier, exceeding market expectations of a $5.8 billion deficit.<\/p>\n
Driving that expansion was a 35.5% year-to-year rise in imports, to $17.3 billion. Export growth moderated 8.8%, to $11.0 billion, Turkstat said.<\/p>\n
The news sent Turkish bonds and the lira lower, extending losses generated by euro-zone debt worries, although shares held firm after sharp declines a day earlier.<\/p>\n
Economists said the widening deficit reflected Turkey’s strong consumer-fueled economic growth, but cautioned that with export growth moderating and imports still surging, the trade deficit and, critically, the current-account deficit, were likely to widen further.<\/p>\n
“Disappointingly, the data show export growth slowing with imports continuing to boom,” said Timothy Ash, an emerging markets economist at RBS in London. But the figures, he added, are “consistent with a 5% current-account deficit for the full year in 2010.”<\/p>\n
Turkey’s economy has recovered rapidly from the economic crisis, posting 10.3% growth in the second quarter, tying China for the fastest growth in the G-20.<\/p>\n
But some policy makers and economists are starting to worry that the heavy dependence on imports and domestic demand is magnifying a potentially fatal flaw in its impressive rebound from economic crisis: a blossoming current-account deficit financed by volatile hot money, or speculative investments.<\/p>\n
Turkey’s Central Bank Governor Durmus Yilmaz recently warned that the quality of the Turkey’s deficit financing was “a concern,” which may require policy to place “restrictions on demand.”<\/p>\n
In September, Finance Minister Mehmet Simsek also expressed doubts about the “quality of financing” entering the country.<\/p>\n
For some economists, the starring role that hot money plays in funding Turkey’s yawning current-account deficit is a red flag that could cause problems if another bout of risk-aversion were to drive investors away from emerging markets and into safe havens, such as the U.S. dollar or gold.<\/p>\n
“We’re talking about a $40 billion current-account deficit in Turkey this year, which needs financing. The big problem is that the moment the global environment changes and there is a drop in risk appetite, then the money may leave, and then we’re in trouble,” said Murat Ucer, an Istanbul-based analyst at Global Source Partners, an economics-research consulting firm.<\/p>\n
Write to Joe Parkinson at joe.parkinson@dowjones.com<\/p>\n
via Turkey’s Trade Deficit Spotlights Risks – WSJ.com.<\/p>\n","protected":false},"excerpt":{"rendered":"
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