Türkiye's Central Bank hikes year-end inflation projections

ANKARA

Türkiye’s Central Bank revised its year-end inflation forecasts upwards on Thursday, as growing geopolitical risks and global financial volatility drive consumer prices to historic highs.

Annual inflation is projected to hit 60.4% by the end of this year and 19.2% by the end of 2023, Sahap Kavcioglu, the bank’s governor, told a meeting held to release this year’s third quarterly inflation report.

The previous estimates were 42.8% for 2022 and 12.9% for 2023.

For 2024, the bank expects the inflation rate to be at 8.8% by the end of the year.

The food inflation forecast for the end of 2022 rose from 49% to 71.3%.

The report said raising the economy’s “current account surplus capacity … is of critical importance for permanent price stability.”

“When global commodity prices start to normalize, our economy will have reached the capacity to run a current account surplus, which marks the beginning of a new era for the Turkish economy, and export-led growth in which the need for short-term financing is minimized,” Kavcioglu said during his presentation.

He also said Türkiye is the only country in the world where there is no talk of recession, underlining how the IMF this week updated the growth figures in all countries downwards, while Türkiye’s was revised upwards.

He noted that investment expenditures continue in a healthy and sustainable manner, with machinery investments continuing to grow steadily.

"While domestic demand remained almost flat in the second quarter, industrial production remained strong with the impact of foreign demand," he said. "The increase observed in industrial production spread throughout the manufacturing industry. Strong economic growth is also reflected in capacity utilization rates."

Last week, the Central Bank kept its interest rate unchanged at 14%, vowing to “continue to use all available instruments decisively” in its strategy of “liraization” until “strong indicators point to a permanent fall in inflation and the medium-term 5% target is achieved in pursuit of the primary objective of price stability.”

"With the decisions we take, we aim for a permanent decrease in inflation as soon as possible. We have used and will continue to use our tools effectively with a liraization perspective," Kavcioglu underlined.

The annual inflation rate in Türkiye in June was 78.62%, according to the latest data.