Inflation in Turkey to drop to single digits by September: Albayrak

TRABZON

Turkey will see single-digit inflation by this September thanks to structural measures by the government, Treasury and Finance Minister Berat Albayrak said on March 19.

“High inflation expectations affect production, consumption, international competition and interest rates,” Albayrak said at an event in the northeastern Trabzon province.

“For this reason, one of our program’s priorities is reducing inflation permanently and reaching a single-digit inflation rate.”

He added that measures taken by the government, such as selling cheaper vegetables and fruits through municipalities, eased inflationary pressures which stemmed from seasonal factors.

Turkey’s annual inflation has dropped from over 25 percent last October to 20.35 percent in January and 19.67 percent in February, according to the Turkish Statistics Institute (TÜİK).

Albayrak said the rate would be below the target of Turkey’s new economic program announced last September.

In the program, the country’s inflation rate target is 15.9 percent for this year, 9.8 percent for next year and 6.0 percent for 2021.

“Turkey will enter a positive process through new reforms,” Albayrak stressed.

The minister also said that the government has remained committed to price stability, budget discipline and prudential monetary and fiscal policies despite the upcoming elections.

“This stance is yielding results,” Albayrak noted.

The country’s Central Bank has vowed to keep policy tight until the inflation outlook displays a significant improvement.

“Developments in import prices and domestic demand conditions have led to some improvement in inflation indicators. Yet, risks on price stability continue to prevail,” the banks said in a statement released after the Monetary Policy Committee (MPC) meeting on March 6 when it decided to keep its policy rate (one-week repo auction rate) constant at 24 percent.

Albayrak also said that Turkey will see a current account surplus in the summer thanks to tourism and exports revenues.

He expects the annualized current account deficit to be $17 billion as of end February.

Albayrak underlined that industrial production posted an increase on a monthly basis in January and said that “the retail sector data was encouraging and the credit volume is also recovering. That is why we say ‘The worst is over’.”

The minister is confident that the country’s economy will show a stronger performance starting from the second quarter of this year.

In the statement released after the MPC meeting, the Central Bank argued that recently released data show that rebalancing trend in the economy has become more noticeable.

“External demand maintains its relative strength while economic activity displays a slow pace, partly due to tight financial conditions. Current account balance is expected to maintain its improving trend,” it added.