Optimistic Ankara says inflation will drop to 24% this year

  • Finance minister predicts single-digit inflation by May 2023
  • A survey of economists announces inflation of 34% at the end of the year
  • C/A deficit $14.88 billion last year – data
  • Minister says Fed rate hikes won’t affect Turkey

ANKARA, Feb 11 (Reuters) – Turkish inflation will fall to around 24% by the end of the year and reach low single digits by May 2023, the finance minister said on Friday, painting a picture much rosier than that of economists who see it at 10%. points above.

Nureddin Nebati said the authorities were no longer intervening in the markets to support the lira, which stabilized considerably after the December crisis. Still, he added that any rate hikes by the US Federal Reserve would not affect the emerging market economy.

Inflation hit a two-decade high of 48.7% in January, fueled by pressure from President Tayyip Erdogan for unorthodox interest rate cuts and the resulting currency crash, which lost 44% of its value last year.

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The central bank’s monthly survey of market participants’ expectations on Friday showed consumer price inflation is expected to end in 2022 at 34.06%. Many economists say the pressure will remain due to soaring prices and wages.

“The only problem now is inflation,” Nebati said in a TV interview on Haberturk TV channel. He added that meetings with investors in London this week were “fantastic”, in part because the government had achieved a competitive and stable exchange rate.

Costly interventions and a state program to protect deposits from depreciation helped stop the lira crisis. Nebati said the program attracted 340 billion lira ($25 billion), after corporate clients were added in recent weeks.


Erdogan’s government says credit, exports and investment will reduce the current account deficit and reduce inflation, which has sent Turks’ cost of living skyrocketing and upset their household budgets. Read more

Official data on Friday showed the current account deficit narrowed nearly 60% to $14.88 billion last year, less than expected, while the manufacturing sector remained warm in December.

Turkey’s import-dependent economy, worth $717 billion in 2020, has been plagued by large trade deficits and a booming growth cycle.

After three months of surplus, a deficit reappeared in the last two months of 2021 due to the increase in imports of energy and intermediate goods. The December deficit was $3.84 billion.

Nebati said the economy had achieved strong growth with a low current account deficit and would continue to do so.

The government would take further steps to get some $25 billion worth of gold “under the mattress” and into the financial system, he added.

As part of the new economic plan, the central bank has lowered the key rate by 500 basis points to 14% since September, even as most other banks around the world decided to tighten. The Fed is expected to raise rates next month in the face of rising US inflation.

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Additional reporting by Daren Butler; Written by Jonathan Spicer; Editing by Dominic Evans and Alex Richardson

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