Finance minister: Turkey to achieve goal of ending year with inflation below 12%



Stability in exchange rates and a decrease in imports helped maintain the positive outlook in inflation, says Finance Minister Albayrak, suggesting that the data shows Turkey would end the year below its 12% inflation target

Turkey’s annual consumer price index rose less than expected in November, increasing the chances of a sizeable rate cut by the central bank next week, even as inflation rebounded from a near three-year low a month earlier.

The consumer price inflation rose to 10.56% year-on-year last month, the Turkish Statistical Institute (TurkStat) announced Tuesday.

Elaborating on the data, Turkey’s Treasury and Finance Minister Berat Albayrak said the data showed Turkey would end 2019 achieving its inflation target of below 12%.

The recovery in the outlook continues, Albayrak said on his social media account. He emphasized that last month’s figure was in line with the government’s projections.

The official data showed that the increase was prompted by sharp rises in prices of alcohol and tobacco with 43.35%, as well as education (14.35%), miscellaneous goods and services (14.03%), health (13.85%) and hotels, cafes and restaurants (13.07%).

Clothing and footwear posted the highest monthly price increase with 2.69% while the highest monthly fall was seen in miscellaneous goods and services with 0.44%.

Among multiple surveys over the last days, the median estimate in a Reuters poll of 15 economists stood at 11% for annual inflation in November. An Anadolu Agency (AA) survey last week showed that a group of 14 economists forecast an average annual climb of 10.97% in consumer prices for the month. The median of 23 forecasts in a Bloomberg survey projected annual inflation to rise to 11%.

Month-on-month, consumer inflation stood at 0.38% last month, compared with a poll forecast of 0.7%.

Turkey’s inflation has dropped significantly this year after topping 25% in September last year amid high fluctuations in exchange rates. It had eased to 9.26% in September, when it hit single digits for the first time since July 2017, before dropping to 8.55% in October, its lowest since Dec. 2016.

In the face of rising inflation, the Central Bank of the Republic of Turkey (CBRT), which says it sets its monetary stance to leave a “reasonable” real rate, had hiked its benchmark policy rate – the one-week repo auction rate – to 24% in September last year, from 17.75% at the time, but has since lowered it by 10 percentage points as inflation slowed.

In its July meeting, the bank cut the one-week repo auction rate by 425 basis points, before slashing the rate further by 325 basis points in September and 250 basis points in November to 14%, taking advantage of slower inflation and a steadier lira.

The bank will announce its last rate decision for this year next Thursday.


The steep decline in inflation, which had become a pressing issue for the Turkish economy over the last year, came as a result of expanded efforts, a more stable lira, lowering demand and the fading effect of last year’s price spike.

“The stabilization of the exchange rate during the balancing period, rise in food supply and fall in imports maintain the positive outlook in inflation,” Albayrak noted.

He added that pressures in consumer prices due to producer price index decreased considerably.

“Since the beginning of the year, inflation has fallen by almost 10 percentage points. We will maintain our strong stance in the fight against inflation,” Albayrak said.

Turkey’s inflation rate is expected to hit 12% this year, as laid out in the New Economic Program (NEP) for 2020-2022 announced by Albayrak this September. The program forecasts inflation to stand at 8.5% next year and 6.0% in 2021.

Over the last decade, annual inflation saw its lowest level in March 2011, at 3.99%, while peaking at 25.24% in October 2018.

The economists also forecast that Turkey’s year-end annual inflation would be 11.99% on average, with predictions varying between 10.70 and 12.52%.

TurkStat data Tuesday showed that the 12-month average hike in consumer prices was 15.87% as of last month.

In its latest inflation report it unveiled late October, the CBRT cut the country’s year-end inflation forecast from 13.9% to 12%, in line with the government’s projection. It had attributed it to changing food inflation expectations and improvement in the underlying trend.


Elaborating on the increase in inflation, AA Finance Analyst and economist Haluk Bürümcekçi pointed to the base effect created in the groups such as furniture and household appliances as a result of last year’s tax cuts and the hike observed in processed food prices.

Bürümcekçi stressed that, excluding fruits and vegetables, the rise in other processed and unprocessed food prices led to an increase in food inflation. He also noted that a rise of 0.55% in the energy group followed an increase above last year’s.

Among others, Bürümcekçi warned of the negative effect of the base effect in the headline inflation for the last month of 2019. He also stated that, if there are no major surprises, annual inflation is expected to be between 11% and 11.5% for the end of 2019.

Bürümcekçi went on to say that the central bank should end the year with a final cut and then proceed to wait.

“It looks like certain that the bank, to the extent allowed by the conditions in December, will make a reduction of 150-200 basis points, but in the aftermath we think it is necessary to suspend the interest rate cuts for a while due to the possibility that inflation will remain at least slightly above year-end levels during the first quarter. Therefore, it will be important whether or not a signal will be given in this direction at the December meeting,” Bürümcekçi said.



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