The Turkish Statistical Institute released data on Friday revealing that the country’s trade deficit reached $12.527 billion in May, marking a 17.6% increase compared to the previous year.
The data shows that Turkey’s exports rose by 14.4% to $21.66 billion in May, while imports increased by 15.5% to $34.19 billion.
The Turkish lira fell to a new record high above 25 lira per dollar today, following a lower-than-expected interest rate hike on Thursday.
The decline in the lira came after Turkish Finance Minister, Mehmet Şimşek, confirmed his preference for a free foreign exchange system.
Şimşek tweeted on Thursday, “A policy framework based on market principles, a foreign exchange regime, and an open economy will significantly ensure the flow of capital into Turkey.”
The Turkish Central Bank raised its benchmark interest rate by 650 basis points to 15%. In the bank’s first meeting under its new governor, Şimşek, who was appointed by President Recep Tayyip Erdoğan after his election victory last month, it was stated that they would go even further.
This move represents a shift in direction after years of monetary easing, during which the one-week repo rate dropped from 19% to 8.5% in 2021 in an unconventional policy followed despite rising inflation.
The average expectation in a Reuters poll pointed to an interest rate increase of 21%. Analysts suggest that the lower-than-expected hike indicates that Şimşek may not have significant freedom in tackling inflation forcefully under Erdoğan’s supervision.