One of the most important criteria of mobility in global trade is freight prices. The most well-known and most sought-after price index is the "Baltic Dry." The fact that Turkey's Baltic Dry Cargo Index exceeded 4,100 points indicates that, in addition to global trade, production, foreign trade and freight transportation in the geographical area around Turkey have all become quite dynamic. What this means is that the global COVID-19 virus epidemic led to the questioning of dependency on China and East Asia in the global supply chain and accelerated a new process of supply and resource diversification in favor of Turkey.
Turkey to be a safe port
Data and developments indicate that Turkey will become an increasingly indispensable "safe port" economy of the global supply chain in the coming period and that Turkey's exports will reach $250 billion (TL 2.08 trillion) much faster than expected. The Baltic Dry Cargo Index reached the highest level in its history with 11,793 points on May 20, 2008. Then, with the global financial crisis and its negative impact on the world economy and global trade over the next 10 years, it saw the lowest value on Feb. 10, 2016, falling to an unbelievable low of 290 points.
Today, the level reached by the Baltic Dry Cargo Index represents its highest levels seen since April 1, 2010. The Baltic Dry Cargo freight price gives important signals that commercial activity and shipping in Turkey's region continue to rapidly recover and that Turkey's export connections will remain strong in the upcoming period.
As a matter of fact, the data released by the Ministry of Commerce last week shows that exports increased by 51.8% in August compared to the previous year, reaching $18.9 billion last month, Turkey's monthly export is now moving toward the $20 billion level. What this means is that, aside from the fact that the $210 billion record will be attained in 2021, we now have an export field that is moving toward $250 billion.
This situation also demonstrated that the foreign trade deficit remained at $4.3 billion in August thanks to efforts to reduce dependency on imports. In the January-August period, Turkey's foreign trade deficit decreased by 10% to $29.8 billion. In other words, with the recovery of tourism revenues, it is not unlikely that we will even achieve a current account surplus this year. The ratio of exports to cover imports increased by 15.1 points to 81.5% in August.
Moreover, with the uncertainties regarding the delta variant on one hand, and the rapidly advancing vaccination rates in our region on the other, the real sector in all countries aims to finish orders and shipments of raw materials, intermediate products, and final products as soon as possible and countries are still not sure on how the situation during autumn will be in terms of new restrictions and quarantine measures. This naturally causes freight prices to remain high.
Let's get to the bad news on the upward movement in the Baltic Dry Cargo freight price. These developments also mean that cost inflation continues to accumulate. Globally, over the last year, fuel oil experienced a price hike of 66%, West Texas oil 58%, corn 56%, brent oil 55%, sugar 55%, natural gas 51%, coffee 50%, copper 45%, soybean 45%, cotton 44%, wheat 35%, palladium 12% and platinum 6%. Also considering the increase in freight prices, we can say that the pressure of cost inflation continues on a global scale.
Countries, albeit temporarily, are trying to manage producer prices: in other words, the pressure to increase production costs that directly affect the production of goods and services. On the other hand, they struggle to manage the consequences of the increase in costs on consumer prices. Besides that, the messages from the Jackson Hole meetings confirm that central banks will prefer to "wait and see" for a while and will not hurry.
