Turkey’s gold imports down, but bullion still ‘key’ to the local economy — WGC
Gold demand from Turkey — the fourth largest consumer of the precious metal according to the World Gold Council (WGC)— may be expected to fall this year, but bullion supporting role in the country’s economy is set to soar.
In the WGC’s new report “Turkey: gold in action,” released Thursday, the trade body notes that the country could be a good model to follow by other nations, such as India, since Anakara has undertaken gold reforms that helped bring out "stocks under the pillow", to reduce imports and curb smuggling.
The country, adds the report, has been successful in bringing out the household gold, by including it into the financial system and strengthening economic growth.
In 2012 alone, gold fabrication, consumption and recycling added at least US$3.8bn to the nation’s economy.
An innovative central bank policy introduced in 2011 pushed commercial banks to create a range of gold-backed products to mobilize Turkey’s stock of gold, says the WGC.
This improved the health of the banking sector by reducing costs and improving liquidity, as well as ensuring commercial banks boost their gold reserves. Policymakers have now successfully seen around 250t of gold (US$10.4bn) drawn into the financial system and put to work supporting Turkey’s economy.
Despite the rosy picture painted by the WGC, official figures show that Turkey saw its bullion imports dropped last year. Turkey doesn’t produce enough gold to meet local demand, meaning that it must import the precious metal to be able to sell it to buyers in India, Iran and countries in the Middle East.
Imports more than halved in 2014 to 131 tonnes from a record 302 tonnes the previous year, when they were boosted to help meet demand in neighbouring Iran and the spot gold price hit multi-year lows.
In terms of gold jewellery, however, the country increased exports to $2.9-$3 billion last year from $2 billion in 2013, based on data from the exporters' association.
Turkey has been particularly vulnerable to U.S. rate hikes, which would draw money flows away from its assets and increase the cost of financing its external deficit. The lira lost nearly 8% last year.