Inflation to decline

Inflation to decline

Bloomberg
Inflation to decline

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The inflation rate declined to 10.6 percent from 10.8 percent in November, according to the median estimate of 12 economists surveyed by Bloomberg. The statistics agency will announce the data today at 5 p.m.

The global crisis is curbing European demand for Turkish-made goods such as cars and washing machines while domestic consumer confidence slid to its lowest since 2003 in November.

The slowdown in growth and inflation led the central bank on Dec. 18 to cut its benchmark interest rate by 1.25 percentage points to 15 percent, adding to a half-point cut the month before.

"Weakening domestic demand and falling commodity prices mean that I don’t see any inflationary pressures at all," said Yarkın Cebeci, economist for JPMorgan Chase & Co. in Istanbul. "If we see a low figure for December then we could expect another sharp rate cut."

The global credit crisis has sparked a "sustained restriction on economic activity and as a result the downward pressure on inflation will continue," the central bank said on Dec. 30, saying there was room for further rate reductions.

Passenger car sales slumped an annual 57 percent in November and Ford Motor’s unit in Turkey announced it would halt production at its factories between Dec. 20 and Jan. 12.

Process of disinflation
Cuts in fuel prices in December will add support to a disinflation process that will become clearer in the months to come, the bank said. Consumer-price growth slowed from 12 percent in October.

Oil prices fell to about $40 a barrel in December, compared with a July record of $145 and about $90 a barrel in December 2007.

At the same time, the global credit crisis has pushed the lira down 22 percent against the dollar since the start of September, raising import costs.

The slowing economy will limit the impact of the weaker lira, the central bank said. The bank is aiming for inflation of 7.5 percent by the end of 2009. Meanwhile, Turkey’s trade deficit nearly halved in November from a year earlier for the third consecutive month as the weaker lira cut demand for imports and the price of oil fell.

The trade gap contracted to $2.7 billion, the smallest shortfall in more than three years, from $5.3 billion in the year-earlier period, the statistics agency in Ankara said on its Web site Tuesday.

The 49 percent narrowing was the sharpest decline since 2002 and comes after the economy grew at its slowest pace in six years in the third quarter of the year.

"The only times you see Turkey’s trade deficit declining is when the economy is slowing down, so there’s nothing good for Turkey in these figures," said Ozan Gazitürk, an economist for lender Şekerbank. "In 2009 we’re going to be a country that’s producing less and employing fewer people."

Exports fell 17.5 percent to $9.3 billion in November from a year earlier, the statistics agency said. Imports decreased 27.5 percent to $12.1 billion, the agency said.