Turkey’s foreign trade shortfall contracted by 33% y/y to stand at $5.99bn in July, national statistics office TUIK reported on August 29.

On August 1, initial data from the customs and trade ministry pointed to Turkey’s foreign trade deficit shrinking by 32% y/y to $6bn in July.

“Confirming really the earlier released data, that the adjustment on the Balance of Payments is happening, and quite sharp at that, with exports up 11.6% and imports down 6.7%. If the confidence indicators are anything to go by the real GDP adjustment lower will accelerate the pace of the adjustment in August and likely for the rest of the year,” Timothy Ash of Bluebay Asset Management said in an emailed note.

“That said, for the market to turn, there needs to be a much more credible policy response, and perhaps additional external support, beyond the $15bn from Qatar,” Ash added.

In June, a contraction in Turkey’s foreign trade shortfall was recorded for the first time since June last year. It shrank by 9% y/y. The July data underlines an acceleration in the pace of the rebalancing seen in the Turkish economy.

The initial sign of rebalancing came in May when growth in the year on year foreign trade gap figure fell sharply to 6% thanks to the fast depreciation experienced by the Turkish lira during the month. The trade deficit widened alarmingly across the first four months of 2018.

The manufacturing PMI and real sector confidence indices are also pointing to economy activity in Turkey slowing at a sharper than expected pace.

Also according to the TUIK data, the foreign trade deficit grew 17% y/y to $47bn in January-July.

Exports were up 7% y/y to $96bn in the first seven months of 2018 but imports rose at the higher pace of 10% y/y to reach $143bn.

Turkey’s current account deficit contracted by 22% y/y to $2.97bn in June, marking the first annual contraction since August 2017, the central bank announced on August 10.

The market was expecting a deficit of $3bn for the month, according to a Reuter’s poll of economists.

Across H1, the deficit rose, by 47% y/y to $31bn.

The foreign trade deficit rose by 37% y/y to $77bn in 2017. Exports were up 10% y/y to $157bn but imports rose at the faster pace of 18% y/y to reach $234bn.

The government is forecasting a foreign trade deficit of $68bn for 2018 with exports reaching $169bn and imports amounting to $237bn.