Russian sanctions could add $5 bn to Turkey’s CAD

01 Dec 2015


Russian sanctions could add at least $5 billion to Turkey's current account deficit next year, economists said on Monday, complicating Ankara's drive to tackle the country's deficit as part of its new economic platform.

Russian President Vladimir Putin signed a raft of punitive economic sanctions against Turkey on Saturday in retaliation for its shooting down of a Russian warplane near the border with Syria.

The sanctions, which would ban charter flights to Turkey and outlaw unspecified imports from the country, are seen hitting bilateral trade that was worth $31 billion last year. Russia has also long been one of Turkey's biggest sources of tourists.

The impact could be anywhere from $5 billion to $10 billion on the current account deficit, said Deniz Çiçek, an economist at Finansbank.

"What is important on this point is how much Turkish companies will be able to diversify their markets. If they can create diversification, we can expect the loss to be more limited," he said.

According to the government's medium-term programmme, the deficit will be 5.2 per cent of GDP this year and is expected to fall to 4.9 per cent of GDP next year.

According to Turkish Statistics Institute data, exports to Russia last year were $5.9 billion and imports were $25.3 billion. In the first 10 months of this year, exports were $3.07 billion and imports were $17.3 billion.

"We will probably experience a problem in our trade relations with Russia for some time. In particular when we calculate the cost due to export and tourism sources it will be around $5-8 billion," said Garanti Securities chief economist Gizem Öztok Altinsaç.

"Hence there are risks to the $35 billion current account deficit which we have calculated for 2015 and this figure may rise above $40 billion."

Prime Minister Ahmet Davutoglu last week unveiled his new government's economic programme, promising to "permanently" solve the current account deficit.

A deficit in the current account means the value of imported goods and services is greater than the value of those exported.

But Davutoglu's plans may be complicated by Russia in the near term.

"The economic sanctions announced at the weekend indicate that the impact of the Russian crisis may deepen," said Muammer Kömürcüoglu, an economist at Is Investment, who put the negative impact at around $5 billion.

Yet, some analysts feel that Russia, which is struggling under the weight of American and European sanctions, may not have economic resilience to sustain such pressure on Turkey, a NATO member.

Turkish-Russian commerce is worth an estimated $31 billion annually, with Russian wheat and gas and Turkish agricultural products making up the bulk.

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