Turkey will manage to reduce inflation “sooner or later”, in the same way that it succeeded in ensuring the stabilization of the exchange rate and took interest rates off the agenda, its Treasury Minister said on Tuesday and finances.
Addressing an iftar, the fast-breaking meal during Ramadan, in the capital Ankara, Nureddin Nebati said inflation would drop to a reasonable level by the end of the year, which would be followed by a continuous decline.
“If the exchange rate has become stable and interest rates are off the agenda, we will bring down inflation together sooner or later,” Nebati said at the event hosted by the Association of Independent Industrialists and Businessmen (MÜSIAD).
Annual consumer inflation in Turkey jumped to 61.14%, its highest level in 20 years, in March, according to official data, fueled by rising energy and commodity prices and the fallout of the Russian-Ukrainian conflict.
Inflation has been rising since last autumn, when the Turkish lira fell after the central bank launched a 500 basis point easing cycle, which came as the government approved a new economic program – giving priority to low interest rates to stimulate production and exports.
The Central Bank of the Republic of Turkey has kept its key rate at 14% at three monetary policy meetings this year and said disinflation should start partly due to base effects and the resolution of the war in Ukraine. .
The government has said inflation will drop to single digits next year as part of its new economic trajectory aimed at achieving a current account surplus.
To counter rising prices and mitigate the impact on households, Turkey has introduced several value-added tax (VAT) reductions and subsidized a significant portion of electricity bills.
The government last week introduced a tax cut on several products, including hygiene products and medical equipment, and reorganized taxation on the real estate market.
It followed a reduction in taxes on basic necessities and on electricity used for residential and agricultural irrigation.
Nebati said Turkey would “break the inflation inertia caused by the impact of deteriorating expectations despite all these measures we have taken” by developing alternative investment instruments.
“At the end of the year, we will see that inflation has come down to a reasonable level,” he added.