Cover chart: 12 and 24 month ahead inflation forecasts as published by Central Bank of Turkey’s monthly participants survey
Ratings agency Moody’s said Turkey could see consumer price inflation surpass 25% in coming months with another potential interest rate cut in December adding to upside risks for its forecasts. The November survey of participants future expectations, too, revealed a very alarming de-anchoring.
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“We expect consumer price inflation, which stood at 21.3% in November, will accelerate to around 25% or even higher in the coming months,” Moody’s said in the note to clients, dated Wednesday, adding that it forecast CPI at 17-18% at the end of the next year.
Moody’s also said the currency weakness had boosted dollarisation, though so far “confidence in the banking system remains strong with no signs of deposit withdrawals.”
Persistently high inflation would also crimp economic expansion, which Moody’s now forecasting real GDP growth to slow to 4% in 2022 from an estimated 11% for this year.
CPI expectations continued to deteriorate for all terms. Year-end CPI expectation reached to 23.85%, up by 454bps MoM and expectations for 12-month ahead increased by 578bps to 21.39%, according to CB.
Additionally, expectations for 24-month ahead continued to stay at double-digit levels for the 7th consecutive month by 14.41%, up by 265bps. Also, expectations for 5-year ahead continued to deteriorate for the 11th month in a row with 8.72%, up by 76bps.
- Expectations of USDTRY currency for the year-end increased by 38% to 13.77 and 12-month ahead increased by 42.4% to 15.56.
- Economic growth expectation of 2021 increased from 9.2% to 9.9% and the next year’s expected growth rate decreased from 4.2% to 4.1%.
- Expectations of 12-month current account deficit of 2021 decreased from USD19.2bn to USD15.6bn and next year’s expectations decreased from USD19bn to USD11.2bn.
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