A belated sense of realism appeared to be in evidence in Ankara this week when the Central Bank of Turkey (CBRT) raised its inflation forecasts to 12.1% for the end of this year and 9.4% for the end of 2021.
“Whether inflation falls below 10% next year clearly depends on the external backdrop, the global recovery and FX,” says Deutsche Bank emerging markets strategist Christian Wietoska. “But 9.4% is much more realistic than the CBRT’s previous forecast or our initial expectations of an increase in the forecast to 8%.”
9.4% is much more realistic than the CBRT’s previous forecast
However, the CBRT has some way to go to convince the market that it is serious about tackling inflation, reducing the banking sector’s reliance on external funding and resisting political interference.
Turkey has taken a variety of measures to prop up the lira this year. These include imposing withdrawal limits and time delays (mostly for private individuals owning FX deposit accounts) and increasing in size and frequency short-term and long-term FX swaps and gold swaps in order for the CBRT to source more USD that can be sold to support TRY.
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