Turkey's Gold Imports Blamed for Record Trade Deficit
Wednesday, 2/12/2014 20:45
Gold imports "account for much of" yawning trade deficit as Lira sinks...
GOLD IMPORTS to Turkey rose some 150% in 2013 to more than 300 tonnes, confirming its place as the world's fourth-largest consumer market but sparking claims that the country's affinity for gold is denting its economy, by worsening the trade deficit.
With the Lira sinking to record lows against the US Dollar, the head of Turkey's central bank stated last month that exchange controls are not being discussed.
But in comments reminiscent of India shortly before its central bank started hiking gold import duty – and then imposed strict rules which effectively shut off flows to the world's No.1 consumer market in 2013 – "Turkey's gold imports last year boomed by 150% to reach a record level," says the
Hürriyet Daily News, "accounting for a
considerable portion of the deficit."
With
international gold prices slumping 30% in 2013, "It looks like the sharp rise in imports caused the foreign trade deficit data which came remarkably overexpectations," the newspaper quotes senior investment strategist Ali Çakıroğlu at HSBC bank.
Turkey's so-called
"gold for oil" trade with Iran, enabling its neighbor to raise foreign currency by side-stepping US-led sanctions over its nuclear development program, continued in 2013.
"Turkey's government has [also] attempted to persuade its citizens into
storing their vast gold holdings in the nation's banking system," adds an Anadolu Agency article.
Gold reserves quadrupled at the Central Bank of the Republic of Turkey in the two years starting autumn 2011, when it invited commercial banks to hold a portion of their required reserves in the form of gold deposits – gold typically deposited with them by their own clients in return for a rate of interest.
Referring to Turkey's estimated 5,000 tonnes of private jewelry, bar and gold coin holdings as being "out of the banking system," the Anadolu news agency adds that "If only 20% of this "investment" was added back into the economy, it would amount to a financial resource of about $36 billion."
So far in 2014, gold bullion imports to Turkey fell over 80% in January from December, latest data show, dropping by almost one-half from the same month last year.
Because "among the major gold consuming emerging markets," notes London-based consultancy
Metals Focus, "Turkey is the only one where currency effects sufficiently offset [end-2013's] weakness in Dollar gold" to push prices higher.
"Lira depreciation has made gold more expensive," Reuters quotes Mehmet Ali Yildirimturk, head of Istanbul's Chamber of Jewelers. "The Fed's steps have caused world gold prices to rise. These have all negatively affected gold demand."
Furthermore, says Metals Focus, new credit-card rules starting 1st February may also have crimped gold demand in Turkey. Because "in an effort to reduce debt and help cool the economy, consumers will no longer be able to part-pay for goods."
The consultancy's Turkish contacts suggest part-payment could account for some 20-30% of gold jewelry retail sales.
The Lira has so far stabilized in February, rallying more than 6% vs. the Dollar and outpacing this month's rise in world gold prices.
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