Spiking euro against dollar lucrative for Turkish exports

Published 25.08.2017 23:40

The upward trend in the euro-dollar exchange rate has positively affected Turkey, which realizes about 50 percent of its exports to the European Union (EU), Turkish Exporters Assembly (TIM) has said.

TIM Chairman Mehmet Büyükekşi pointed out the fact that if export figures for the month of July were calculated using the euro-dollar exchange rates from July 2016, Turkey's exports would be valued at $107 million less. He stressed that the euro's gain against the greenback this year led to an increase in the dollar equivalent of the exports realized in euros.

Speaking to Anadolu Agency (AA) on the effects of the mobility of exchange rates on foreign trade, Büyükekşi said that the rate of euro and dollar usage was at 86 percent in Turkey's exports and 89 percent of its imports.

He also highlighted that the use of the Turkish lira as a medium of exchange in foreign trade has increased in recent years thanks to the efforts of President Recep Tayyip Erdoğan and Economy Minister Nihat Zeybekci.

"TL usage in both imports and exports were at around 10 percent," he said.

Büyükekşi added that almost 47.5 percent of export transactions and 33 percent of import transactions were carried out in euros since Turkey realizes 48 percent of its exports and 35 percent of its imports with the EU countries.

"In other words, importing in dollars and exporting in euros also confirms the fact that the changes in the euro-dollar exchange rate affect our exports. Globally, export figures of any country are announced in dollars," Büyükekşi said.

He said that exports realized in euros were calculated by converting the figures into dollars on the basis of opening days of declarations and added that the spike in the euro price against the dollar can reflect positively on export figures, while a decrease can reflect negatively.

Büyükekşi underlined that the dollar is globally used in foreign trade and noted that Turkey mostly uses the dollar with trade with partners including China, India, and Middle Eastern countries as well as the U.S.

He said that TIM organizes informative programs for exporters to protect them against foreign exchange risks and about the advantages of providing financing through capital markets. He suggested that manufacturers should increase production and turn to new markets in order to keep the risks involved with currency exchange rates at a minimum.

Enver Erkan, deputy research manager at KapitalFX, recalled that the European economies were in a recovery process, which was expected to reflect positively on exports. He said that if the current state continues, the euro-dollar exchange rate would hover around 1.19 on average for three months and hit 1.22 in a year.

Pointing out that a strong euro will drag down the already weak inflation expectations in Europe, Erkan said that a strong currency can be a handicap before Europe, which is having difficulty especially in creating inflation.

"Therefore, in this monetary environment, the European Central Bank (ECB) should continue to be flexible. So, on the exit from the monetary incentive, a gradual exit model that does not disturb the market will be implemented much like what the Fed did in the U.S. previously," Erkan said.

He noted that a slow and gradual exit seems appropriate as postponing the policy regime for too long could lead to a loss of credibility, which happened with the Fed.

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