Retail sales in Turkey rose at the fastest pace since June last year and the current account deficit widened as the authorities kept interest rates at deeply negative levels when compared with inflation.
Sales by shops and online retailers climbed by 2.1 percent in April compared with March, the Turkish Statistical Institute said on Monday. On an annual basis, sales increased by 14.7 percent, the most since October.
Turkey’s government has introduced measures to encourage spending by consumers and businesses after the COVID-19 pandemic peaked. It has continued to prioritise economic growth over inflation, which accelerated to an annual 73.5 percent in May, the fastest pace since 1998. The economy grew by almost 12 percent last year.
The current account recorded a deficit of $2.74 billion in April, increasing by $1.22 billion from the same month of 2021, the central bank said on Monday. That brought the 12-month rolling deficit to $25.7 billion. The deficit was swelled by imports of energy products — Turkey imports nearly all the oil and natural gas that it consumes. The current account, excluding gold and energy, recorded a surplus of $4.43 billion, as imports climbed.
The government instructed the central bank to cut interest rates to 14 percent from 19 percent late last year to help boost the economy. Last week, it sought to put the brakes on consumer demand without raising interest rates after the lira weakened sharply against the dollar, introducing measures to curb borrowing by households and to encourage saving in liras.
Interest rates on consumer loans stood at an average of 30.3 percent annually in the week to June 3, well below annual inflation, according to central bank data. Foreign investors in Turkey, who have pulled tens of billions of dollars out of the country over the past three years, are calling on the government to allow the central bank to hike interest rates to support the lira and slow inflation.
Concerns about economic stability in Turkey meant the lira lost 44 percent of its value against the dollar last year as Turks and foreigners sold the currency in droves. It has fallen by more than 20 percent in 2022. The lira was trading down 0.1 percent at 17.23 per dollar on Monday.
Industrial production increased by an annual 10.8 percent in April, the statistics institute said on Monday.
Ahval