Turkish inflation seen at 42.5 precent in 2023

Turkey’s inflation is expected to fall to 42.5% this year, much higher than an official forecast, while GDP growth is seen far below the official forecast at 3%, a Reuters poll showed on Tuesday.

The results cast doubt on President Tayyip Erdogan’s programme of slashing interest rates to support economic growth, exports, investment and employment.

The rate easing cycle pursued since late 2021 led to a currency crisis, which in turn sent inflation to a 24-year high of 85.5% in October. While inflation eased to 64.3% in December due largely to base effects, economists expect its decline to be slower than Ankara expects.

The median forecast of 12 economists in the poll stood at 42.5% for inflation at end-2023, with forecasts ranging between 28.5% and 48.1%. It was seen falling to 26.4% in 2024.

Those compare to Ankara’s inflation forecasts of 24.9% for 2023 and 13.8% for 2024. Officials say price stability will be achieved once chronic current account deficits flip to surpluses, as a result of the interest rate-cutting programme.

The poll also predicted gross domestic product (GDP) growth would fall short of official expectations. It is seen at 3% for both this year and next, according to the median of 28 economists, compared to Ankara’s forecasts of 5.0% and 5.5%, respectively.