Turkish VP Expects 20% Inflation Drop by August, Targets Single Digits by 2026

Turkish Vice President Cevdet Yılmaz anticipates a significant decline in inflation, particularly during the summer months of June, July, and August 2023. Yılmaz expects a decrease of around 20% in these three months due to seasonal effects, the impact of government policies, and base effects.

Yılmaz emphasized that while high annual inflation figures will be seen, a downward trend will begin with the announcement of June inflation, which will accelerate in July and August. The government's top priority is to reduce inflation, with the objective of reaching single-digit inflation by 2026 "Reducing inflation is the government's top priority, with the goal of achieving single-digit inflation by 2026," Yılmaz stated.

The Central Bank of the Republic of Turkey has raised its key one-week repo rate by 4,150 basis points since last June to ease demand, the main driver of inflation. The government has also initiated extensive work to increase savings in the public sector, aiming to eliminate unnecessary expenditures, prioritize spending, and make it more efficient.

Why this matters: Turkey's efforts to combat inflation have significant implications for its economy and the well-being of its citizens. The government's commitment to reducing inflation and achieving price stability is crucial for fostering sustainable economic growth and improving the living standards of the Turkish people.

Despite the challenges posed by high inflation, international financial institutions have revised their economic growth forecasts for Turkey. The International Monetary Fund projects 4% growth in 2023 and 3.25% in 2024, while the World Bank forecasts 4.2% growth this year, 3.1% in 2024, and 3.9% in 2025. The Turkish government's medium-term economic program expects the economy to grow 4% next year, 4.5% in 2025, and 5% in 2026, with year-end inflation projected to drop from 65% this year to 33% next year, 15.2% in 2025, and 8.5% in 2026.

Key Takeaways

• Turkish VP expects 20% inflation drop in summer 2023 due to seasonal, policy effects.
• Govt aims to reach single-digit inflation by 2026, with central bank raising rates.
• IMF, World Bank forecast 4% GDP growth for Turkey in 2023, with inflation decline.
• Govt's medium-term program projects inflation to drop from 65% in 2023 to 8.5% in 2026.
• Reducing inflation is top priority to foster sustainable growth and improve living standards.