Turkiye's Central Bank Forecasts Inflation at 22.3 Percent by Year-End
Speaking at the presentation of the second quarterly inflation report of 2023, Governor Sahap Kavcioglu cited the Turkish lira's stability and cheaper global commodity costs as factors for a slowdown at the rate.
The governor emphasized that the policies they implement have the power to reduce inflation, recalling that the rate, which reached a 24-year peak of 85.5 percent in October last year, dropped to 43.7 percent in April.
"The disinflationary process is driven by the exchange rate stability that was achieved as a result of our effective policies, the improvement in expectations, and the slowdown in global commodity prices increases," Kavcioglu explained.
The governor, however, said the decline in inflation was slightly slower than the path that they announced in the previous inflation report, adding that the rate was significantly driven by the increases in unprocessed food prices that exceeded projections.
"We project that credit conditions compatible with the disinflation process and the stable exchange rates within our current policy framework will ensure a greater improvement in the underlying trend of inflation than we estimated in the previous report," he said.
High inflation makes Turkiye's economy vulnerable and leads to a sharp decline in Turkish households' purchasing power.
The governor said the Turkish banking sector maintains its robust outlook, thanks to the country's "holistic strategy." Key banking indicators have "confirmed the robustness of the banking sector," he added.
The energy prices were the main driver of the country's rising foreign trade deficit in 2022, Kavcioglu said, adding he was optimistic for the foreign trade balance for the rest of 2023.
"The rest of 2023 will be a period in which the current account rebalancing will be stronger. In addition to the normalization in energy prices and gold imports, further recovery in global demand is expected to improve the foreign trade balance on an annual basis, through its effects on exports," Kavcioglu said.
On the rebound of tourism revenues, they expect the current account balance to be maintained in the second half of the year, he added.
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