Turkey cuts growth forecast, raises inflation outlook for 2023

September 06, 2023 (MLN): Turkey unveiled its economic targets for the next three years under a new team of technocrats who are trying to re-establish market confidence, after years of unconventional policies that deterred foreign investment and triggered an inflation crisis, Bloomberg reported.

The government revised its forecast for economic growth this year to 4.4% from 5%, according to the Medium-Term Program presented on Wednesday in the capital, Ankara.

The inflation outlook for the end of 2023 was raised to 65% from 25%.

The year-on-year inflation rate rose faster than expected in August, to 58.9%, underscoring the central bank and President Recep Tayyip Erdogan’s challenge to end a cost-of-living crisis.

The central bank, under its new Governor Hafize Gaye Erkan, sharply revised its year-end inflation forecast to 58% in July, more than doubling it from her predecessor’s figure.

The bank expects price growth to slow to 33% at the end of next year after peaking in the second quarter. Its 2025 year-end inflation projection is 15%.

The current benchmark interest rate is 25% after the central bank raised it by 750 basis points — more than expected — in late August. The bank has signaled the tightening cycle will continue.

Turkey is slated to hold local elections in March. Erdogan has for years boosted monetary stimulus ahead of polls in the country and wants to win back the biggest city of Istanbul, now held by the opposition.

Copyright Mettis Link News