Turkey eyes inflation below 10% next year
Economy expected to expand 9% this year before settling at 5% growth in 2022
Turkey expects inflation to fall to 16.2 per cent by the end of the year and hit 9.8 per cent by the end of 2022, according to government forecasts published late on Sunday that analysts said were optimistic and showed its emphasis on economic growth over battling high prices.
The economy is expected to expand by 9 per cent this year before settling at about 5 per cent growth next year, in line with outside forecasts, according to the government’s outlook set out in its so-called medium-term programme. Annual consumer price inflation stood at 19.25 per cent in August after a year-long rise.
Long-drawn issue
Turkish inflation has been in double digits for most of the last four years, and has climbed in recent months due to Turkish lira weakness and depleted monetary credibility after President Tayyip Erdogan sacked the hawkish former central bank governor.
The central bank — which has a 19 per cent benchmark interest rate — said in July that inflation should fall even more rapidly to 14.1 per cent by the year’s end and to 7.8 per cent by the end of 2022.
Interest rate cuts are expected in coming months despite the price pressures, in part due to calls for monetary stimulus from Erdogan.
The government said those pressures should ease this year due to base effects, import-price relief as lira depreciation ebbs, and a reversal of soaring food prices.
BGC Partners called the growth projections “reasonable” but the inflation projections “the most optimistic” in the programme.
It “once again shows the government’s prioritisation of growth over inflation, in our view,” it said.
A bank trader who requested anonymity said achieving the “too optimistic” inflation forecasts would require tight monetary policy until at least the second quarter of 2022.