Turkey's Central Bank sees inflation ‘decently’ above target at year-end

ANKARA

Turkish Central Bank Gov Erdem Başçı makes a presentation on the key economic indicators during the bank’s annual general assembly held in the Turkish capital of Ankara April 17. AA Photo

The Central Bank head has depicted a darker picture for the course of inflation in the country, saying inflation may be “decently” above the target of 5 percent by the year-end, despite expected recovery in the second-half of the year.

“We expect the inflation to come down in June, after May, but still we may end the year decently above 5 percent,” Central Bank Gov. Erdem Başçı said in a presentation he made during the opening of the 82nd Annual General Assembly of the bank in Ankara April 17.

He said while inflation may be above 5 percent, the current account deficit’s ratio to GDP may come around 5 to 6 percent bases on the developments and growth slightly below 4 percent.

Turkey missed its year-end inflation target last year as well, as the consumer price index increased by 7.4 percent through the past year, coming in above the government’s 6.8 percent objective.

Başçı said the upward trend in the consumer prices that has been going on for around a year will likely to persist for a while.

“Inflation has been remarkably affected by the gradual loss of value in the Turkish Lira since last year’s May and continuing devaluation in December,” he said, dubbing these factors as temporary.

He said inflation is expected to touch its peak in May after continuing to rise in April before embarking on a trend of decline as of June.

However, he still noted that the bank may review its year-end target of 5 percent in its April inflation report.

He said reducing inflation to single digit levels was a great achievement, but added the price increase should be below 4.5 percent or lower to talk about real price stability.

Recalling the government has set the 2018 inflation target at 4.5 percent in 10th Development Plan, Başçı said this shows that Turkey “is not at a price stability level yet.”

“It would be compatible with price stability if it would reduce the inflation to 4.5 percent in the upcoming years, around 2023, or a level below 4.5 percent,” he stated.

‘Early’ for growth revision

The Central Bank head also said the economic growth of the country has been hovering at around 4 percent; below the average of 5 percent, predicting this will remain in 2014 as well.

He stressed they see signs that growth will remain slightly below the government target of 4 percent this year, but insisted the bank does not see any reason for a downward revision in growth forecast for now.