Inflation declined slightly in Türkiye for the first time in 3 months
The annual inflation rate in Turkey recorded a slight decline last October for the first time in 3 months as a result of the fading repercussions resulting from the sharp decline in the lira exchange rate during the summer, tax increases, and the state of political stability following the parliamentary and presidential elections that were held last May. .
Data issued by the Turkish Statistical Institute on Friday showed that consumer price inflation declined slightly to 61.36 percent in October on an annual basis, while it recorded a decline of 3.43 percent on a monthly basis.
The Turkish Statistical Institute revealed that the producer price index rose by 1.94 percent on a monthly basis in October, while it rose on an annual basis to 39.39 percent.
Annual inflation rose to 61.5 percent last September, and is expected to continue rising until the second quarter of next year despite the Central Bank raising interest rates by 2,650 basis points to 35 percent, in a retreat from a previous policy insisted on by President Recep Tayyip Erdogan. .
Turkey witnessed its highest inflation rate in nearly a quarter of a century in October last year, when it recorded 85.51 percent.
Expected rise
In the fourth and final quarterly inflation report for the current year, announced by its president, Hafiza Kaya Erkan, on Thursday, the Turkish Central Bank expected that the main trend of inflation would show a decline as of last October.
“We estimate that there will be temporary increases on track in November, January and May, due to factors outside the influence of monetary policy,” Gaia Ercan said.
The Turkish Central Bank revised its inflation expectations at the end of the year upward from 58 to 65 percent.
Gaia Erkan said that expectations indicate that inflation will rise at the end of this year to 65 percent, and will rise to 36 percent at the end of 2024, compared to previous expectations of 33 percent, while it will decrease by the end of 2025 to 14 percent instead of 15 percent. 100 in previous forecasts.
She added that inflation will reach its peak in May 2024 at between 70 and 75 percent due to the return to work at natural gas prices after the end of the discount provided to consumers for a year.
During the period of the presidential and parliamentary elections held last May, the Turkish government exempted citizens from paying gas consumption bills that month, and also provided a reduction on bills for a year by accounting after the first 25 cubic meters, aiming for it to continue until after the local elections scheduled for 31. March 2024.
Gaia Erkan stressed that the Turkish Central Bank will continue its approach of tightening monetary policy to combat inflation, and will continue to use all available tools until sustainable progress is achieved in reducing inflation, noting that the inflation target in the medium term remains at 5 percent, and that financial policies must be in line with… Tightening monetary policy to ensure curbing inflation.
She pointed out that inflation expectations still face risks due to extreme fluctuations in oil prices as a result of geopolitical risks.
New procedures
The Turkish Minister of Treasury and Finance, Mehmet Simsek, announced that his country may exempt financial institutions from a standard that calculates excessive inflation in data, a step that could support the state’s tax income.
Simsek said during a discussion of the Turkish Parliament’s Planning and Budget Committee on Tuesday: “We will switch to using inflation-adjusted data, and we may exempt financial entities from this procedure.”
The aforementioned financial institutions may include banks, financial brokerage companies, and discount service companies, which guarantees significant tax revenues for the government.
Turkish companies have previously called for implementing this measure, and several foreign companies with branches in Turkey have already adjusted their financial statements according to inflation.
According to Turkish accounting standards, a cumulative inflation rate of about 100 percent over 3 years is required for this amendment to be applied, and this level has already been exceeded, but a law issued last year delayed the implementation of the new amendment until the release of earnings data for the entire year 2023.
High reserve
Meanwhile, the Turkish Central Bank announced that its total reserves had risen to $126.56 billion in the week ending October 27 (last week), reaching their highest level in 32 weeks.
According to the weekly data issued by the bank, total foreign exchange reserves decreased by $155 million compared to the previous week, to $82 billion and 412 million, compared to $82 billion and 567 million on October 20.
Gold reserves increased by $590 million from $43 billion and 558 million to $44 billion and 148 million. This recent increase in gold reserves was an important factor in increasing the reserves.
The reserves led for 15 consecutive weeks and broke the record for the longest period of increase in the history of the data, which began recording in 1987, as the increase in total reserves between the end of May and the week ending October 27 recorded 28 billion and 102 million dollars.
2023-11-03 16:04:30
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