Turkey’s trade data for May, published on Thursday, did not bring many surprises. Economists at Commerzbank expect continued widening of the deficit to weigh on the lira.

Turkiye's current-account deficit to widen further

“At headline level, the trade deficit ratcheted up to $10.6bn versus just $4.2bn a year ago – but, this widening trend is a well-known result of higher raw material prices.”

“The current-account deficit, excluding energy and gold, is widening, which implies that the prices of all imports are up, not just that of oil imports.”

“Following Turkiye’s successive exchange rate crises since 2018, the weaker lira had helped the current-account balance (excluding energy and gold) turn positive during 2019 and 2020, but this improvement is now behind us. And a worsening current-account balance is obviously negative for the lira.”