Turkey

Turkey vows to tackle inflation, current account gap

Ruling AK Party to focus on lowering current account gap, inflation after June 24 elections, deputy prime minister says

Tuba Şahin   | 06.06.2018
Turkey vows to tackle inflation, current account gap Turkish Deputy Prime Minister Mehmet Simsek

Ankara

By Tuba Sahin

ANKARA 

The ruling Justice and Development (AK) Party will prioritize tackling Turkey's inflation and current account deficit after the June 24 elections, the deputy prime minister said Wednesday.

"We will reduce concerns about this [higher inflation rate and current account gap]," Mehmet Simsek said during an interview on state broadcaster TRT.

The country's annual inflation rate was 12.15 percent in May, up from 10.85 percent in April, according to the Turkish Statistical Institute on June 4. 

Simsek blamed exchange rate shocks, high oil prices, tensions with European countries and the U.S., and Turkey's fight against terror for the rise in inflation rate.

In the beginning of the year, the USD/TRY rate was 3.78 while the average rate was 3.65 last year. On Thursday, the rate opened at around 4.62.

Recalling that the Turkish Central Bank had taken necessary steps to support the Turkish lira, Simsek said the government also took macroprudential measures to manage foreign exchange risks.

Simsek said consumer prices will start declining by the second half of this year.  

The Central Bank in late May hiked the late liquidity window interest rates, as the borrowing rate was kept at 0 percent while the lending rate was raised from 13.50 to 16.50 percent.

The bank had also raised the upper limit of its forward foreign exchange sale position from its current level of $6.15 billion to $8 billion for the second quarter of this year.

It also updated the calendar for Turkish lira-settled forward foreign exchange sale auctions to be held during the same period.

The bank fixed foreign exchange rates for rediscount credit repayments for export.

Simsek noted that the government-led investments of private and public sectors to areas which can narrow current account deficit.

"It will no longer be a problem," he said.

Turkey's current account deficit hit $4.8 billion in March, marking an increase of $1.7 billion, year-on-year, according to the latest data from the Central Bank.

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