A 25% rise in imports pushed Turkey’s trade balance to $9.21 billion December, or an annualized 12.5% of GDP. That’s a huge number, and clearly unsustainable. We don’t observe much of a seasonal factor in the Turkish trade deficit, but the seasonal adjustment module in our econometrics package trims the December deficit to a bit over 10% of GDP.

That doesn’t make any difference. It’s unmanageable. By way of comparison, the Greek trade deficit just before the country’s 2012 crisis was only 8% of GDP.

The question is why the Turkish lira hasn’t collapsed further than it did in 2017. One reason might be that some of the trade deficit isn’t really trade at all. About $17 billion of Turkey’s $76.7 billion trade deficit during 2017 was due to precious metals imports, a 142% jump over 2016. That might reflect hedging against currency depreciation by Turkish citizens, but it also might reflect money-laundering for Iran, for which a top executive of Turkey’s Halkbank with close ties to the Erdogan government was convicted in Federal court in December.

Nonetheless, the numbers are huge by any standard, and the fact that Turkey’s currency hasn’t nose-dived suggests that Turkey has obtained financing for political reasons, for example, from Qatar.