Deutsche Bank sees strong disinflation in Türkiye

LONDON

Türkiye is likely to see strong disinflation over the coming months and a rebalancing of the economy without a hard landing, according to a Deutsche Bank strategist.

Speaking to Anadolu, Hans-Christian Wietoska, head of Central Eastern Europe, Middle East and Africa Research at Deutsche Bank, said Türkiye has completed the first phase of rebalancing its economy and is now entering the second stage.

“We see inflation at around 40 percent by year-end due to slowing domestic demand, base effects and the recent stability of the lira. We expect a strong disinflation process,” he said.

The Turkish Central Bank forecasts a year-end inflation rate of 38 percent.

“The key question, and also part of the second stage, is getting inflation to 20 percent. This is the next step, and this is a challenge because 40% will be more or less done by the end of the year,” said Wietoska, adding that it will be critical for the central bank to maintain a tight monetary stance.

The economy will see a cooldown in the second stage, and it will be important how the central bank reacts, he said.

Deutsche Bank economists forecast Türkiye’s GDP growth at 3.5 percent this year, relative to an average growth rate of around 5 percent over the past five years.

Since Türkiye shifted to orthodox macroeconomic policies, there has also been an improvement in the stance of international investors, according to Wietoska.

Global investors are eying Turkish lira bonds, with $8.5 billion inflows already seen over the past eight weeks, he said.

“It can even go to $20 billion. There is room for at least another $10 billion to $15 billion in inflows by the end of this year. More can follow next year, with room for overall foreign exposure of $30 billion to $40 billion, compared to the current around $10 billion,” Wietoska said.