Istanbul: Turkey’s trade deficit fell 30 per cent in August on the back of strong gold sales to Iran, bolstering efforts to improve its current account and giving more room to cut interest rates.

The trade deficit fell to $5.86 billion (Dh21.5 billion), the Turkish Statistics Institute said, compared with a forecast for $8.10 billion in a Reuters poll and a $7.89 billion deficit in July.

“This data is a result of soaring gold exports, which broke a record with $2.3 billion in August,” Oyak Securities economist Mehmet Besimoglu said on Friday. “Gold exports were to Iran, made via the UAE.”

Turkish gold sales to Iran have soared as Iranians turn to the precious metal to protect savings and, potentially, to trade as Western sanctions aimed at forcing the Islamic republic to curb its nuclear programme tighten.

Turkey’s gold exports, as a whole, jumped more than fourfold to $11.2 billion in the first eight months of 2012.

Offsetting Europe slowdown

Exports rose 14.5 per cent to $12.87 billion, as growing trade with markets in Africa and the Middle East eclipsed a slowdown in demand from Europe. Imports fell 4.8 per cent to $18.74 billion.

Overall exports to the UAE jumped eightfold to $2.23 billion, making the UAE Turkey’s biggest export destination in August.

“The improvement in the foreign trade deficit accelerated sharply in August. It is good news for the current account deficit, but bad news for growth,” BGC Partners economist Ozgur Altug said.

Central bank governor Erdem Basci said last Friday while the bank expected economic growth to pick up next year and inflation to fall, the extent to which this would allow it to cut rates would depend on how quickly exports grow.

The trade deficit in the first eight months of the year narrowed 21 per cent to $56.6 billion.

Exports to Africa and the Middle East rose 43 per cent and 63 per cent respectively, while exports to Europe, Turkey’s main trading partner, fell 9 per cent.

Policy rate cut

“Looking ahead, imports will remain weak and gold exports will continue to remain strong. The trade data is supportive for a policy rate cut,” Besimoglu at Oyak Securities said.

The central bank cut its overnight lending rate for the first time in seven months at its last monthly policy meeting on September 18, and hinted it could do more to cushion the slowdown in economic growth.

The bank cut the upper boundary of its interest rate corridor 1.5 points to 10 per cent, a bigger cut than economists had forecast. It kept the one-week repo rate, its main policy rate, at an all-time low of 5.75 per cent.