Picking up where it left off last year, Turkey has made a buoyant start to 2022 as its exports hit a record high in January, the trade minister announced on Wednesday.

But the country’s trade deficit leaped on the back of energy imports that nearly quadrupled compared to a year ago, according to the data unveiled by Trade Minister Mehmet Muş.

Foreign sales surged by 17.6% year-over-year to $17.6 billion (TL 236.82 billion) in January, an all-time monthly high, Muş told a meeting in the capital Ankara to announce preliminary figures.

The acceleration achieved in exports in 2021 has maintained its pace, Muş said.

But imports spiked 55.2% to $28 billion last month due to the unexpectedly harsh winter conditions and rising energy prices, the minister noted.

Of this, energy imports accounted for around $9 billion, the data showed. Turkey’s energy imports, which stood at $2.6 billion in January last year, began rising at the end of last year due to higher consumption and the rise in global energy prices. They stood at $7.2 billion in December.

Turkey is almost completely reliant on energy imports from Russia, Azerbaijan and Iran to meet its needs. Iran cut natural gas flows last month due to a technical failure, leading to reduced power and gas supply for industrial zones in Turkey.

The country’s trade deficit jumped 240.7% year-over-year in January to $10.44 billion.

"Our foreign trade volume increased by 38% to $45.6 billion in January compared to last year," Muş said.

The rise in exports was driven by a 57.8% jump in iron and steel exports, while machinery and boiler exports rose 2.5% and automotive exports increased 1.2%.

President Recep Tayyip Erdoğan is seeking a shift to a current account surplus under his government’s new economic policy, which is focused on low interest rates and stronger exports and credit.

Turkey’s exports jumped nearly 33% year-over-year to an all-time high of nearly $225.4 billion in 2021.

Imports were up 23.6% year-over-year to around $271.4 billion, while the overall foreign trade volume leaped to $496.7 billion.

Erdoğan has said the performance prompted the upward revision in the country's end-2022 export target to $250 billion, up from around $230 billion.

After being hit in 2020 as the pandemic hurt trade with Ankara’s biggest partners, Turkey’s exports saw all-time highs in 12 out of the last 13 months.

Free trade deal with Ukraine

Muş also confirmed that Turkey and Ukraine will sign a free trade agreement on Thursday when Erdoğan visits Kyiv amid tensions between Ukraine and Russia.

Turkey is a maritime neighbor of both Ukraine and Russia, in the Black Sea, and has good ties with both. It has called on them to avoid any military conflict and warned Russia that an invasion of Ukraine would be unwise.

Ukrainian President Volodymyr Zelenskyy on Tuesday also said Ankara and Kyiv were due to sign the long-awaited free trade deal.

"Tomorrow, hopefully, we will sign a New Generation Free Trade Agreement with Ukraine as the fruit of more than a decade of negotiations," Muş said.

Ukrainian Prime Minister Denys Shmygal on Wednesday also said Ukraine and Turkey will sign a dozen agreements.

"We have intensified negotiations with our Turkish partners to ensure that the (free trade) agreement meets the interests of Ukrainian business, creates opportunities for our exports and the potential for modernization of Ukrainian enterprises," Shmygal told a government meeting.

Pointing to the strong ties between Turkey and Ukraine, Muş said the bilateral trade volume jumped around 60% to $7.4 billion in 2021.

The figure surged from almost $4.7 billion in 2020 and business world representatives say it could easily leap up to $10 billion within two to three years with the free trade agreement.

"Especially the diversification of the products subject to our bilateral trade is pleasing," Muş said.

The deal is an important step to reach the $10 billion bilateral trade volume target set by the two countries’ presidents, he underlined.

Negotiations on a free trade deal have dragged on for about a decade due to disagreements over grains and metals, which accounted for about 70% of Ukrainian sales to Turkey.

Other agreements due to be signed on Thursday include cooperation on high tech, aviation and space, youth policy, and law enforcement, Shmygal said.

Erdoğan and Zelenskyy will chair the 10th High Level Strategic Council meeting to be held during the visit, which will mark the 30th anniversary of diplomatic ties.