Turkish inflation to show sustained decline by end of year: Nebati

The public will see Turkish inflation show a downward trend and a sustained decline by the end of this year, the country’s Treasury and Finance Minister said on Saturday.

The government has pledged to rein in soaring consumer prices to protect households and has taken steps to permanently lower inflation, which hit a new 20-year high in March.

“We will all see together how inflation drops each month in this country from December. Things will get better,” Nureddin Nebati said at an iftar event, a dinner party marking the breaking of the daily fast during the holy month of Ramadan.

The event was organized by one of Turkey’s leading business associations, the Association of Independent Industrialists and Businessmen (MÜSIAD), in Istanbul.

Turkey’s annual consumer inflation jumped to 61.14% in March, official data showed, fueled by rising energy and commodity prices and spillovers from the Russia-Ukraine conflict.

Nebati hailed the performance of the Turkish economy in 2021 despite multiple challenges thrown up by the coronavirus pandemic.

The country’s gross domestic product (GDP) rose 11% last year, its highest rate in a decade, as the economy rebounded from the fallout from the outbreak.

Nebati said the capacity utilization rate of Turkey’s manufacturing industry approached 80%, while exports jumped to a record $225 billion (TL 3.3 trillion) in 2021.

CBRT political break

Inflation in Turkey has been on the rise 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 (CBRT) has held its key rate at 14% in three monetary policy meetings this year and said disinflation is expected to start partly due to base effects and the resolution of the war in Ukraine.

The bank is expected to keep its one-week repo rate unchanged again when its monetary policy committee meets this week, according to surveys.

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.

The major initiative of MÜSIAD

For his part, MÜSIAD Chairman Mahmut Asmalı highlighted their goal to increase the number of provinces to 30 with more than $1 billion in exports with the initiative that the association recently launched.

Titled “Anatolian Production and Investment Move,” the initiative aims to expand export-oriented investment and production across the region.

Asmalı recalled that MÜSIAD called 2022 a year of investments, promising efforts and projects that will boost production, exports and employment in the coming period.

The first stage of the initiative involves an investment of around TL 25 billion ($15.2 billion) across 40 sites in more than 20 provinces in the region, where Asmalı said he is looking to boost the export-oriented production mechanism.

Under the first stage, MÜSIAD members implemented investment projects of TL 7.6 billion in Samsun, about TL 4 billion in Adana, TL 1.6 billion in Izmir and TL 660 million from TL to Sakarya, Asmalı said.

Phase one investments have the potential to create an additional 25,000 jobs, he noted.

MÜSIAD has a total of 164 contact points, including 83 in Turkey and 81 countries.

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