Turkey's official headline inflation ends 2022 at 64%, base effect kicks in

Turkey's official headline inflation ends 2022 at 64%, base effect kicks in
/ bne IntelliNews
By Akin Nazli in Belgrade January 3, 2023

Turkey’s official consumer price index (CPIinflation ended 2022 at 64% y/y, the Turkish Statistical Institute (TUIK, or TurkStat) said on December 3 (chart).

The official rate peaked in October at 86%, the highest headline rate recorded by Turkey since the 91% posted in June 1998. With the advent of December, the base effect from a year ago came into effect, pulling inflation down.

At 64%, Turkey remains in the seventh place in the world inflation league.

The Istanbul-based ENAG inflation research group of economists, meanwhile, released an end-2022 inflation figure of 138% y/y.

TUIK also gave an official figure of 98% y/y for producer price index (PPI) inflation at end-2022.

On October 27, the central bank hiked its expectation for end-2022 official inflation to 65% (upper boundary: 68%) from the previous figure of 60% (upper boundary: 64%) given in its July inflation report.

The authority forecast end-2023 official inflation at 22% (upper boundary: 27%).

The guidance was based on the assumption that the Turkish lira (TRY) will not experience another crash. As of mid-afternoon local time on January 3, the USD/TRY pair was up 0.7% to TRY 18.74 from 18.6 on October 27.

If the USD/TRY remains stable, Turkey’s official inflation figure looks set to decline to the 30-40%s across 2023.

On December 22, at its latest rate-setting meeting, the central bank’s monetary policy committee (MPC) kept its policy rate constant at 9%.

Turkey’s policy rate, however, essentially remains idle on the sidelines. The government conducts monetary policy via macroprudential measures and non-capital controls. It does not need to cut the policy rate any further. Turkish President Recep Tayyip Erdogan demanded a single-digit policy rate and it was delivered at 9%.

The turbulence-free mood on the global market continues. Turkey’s five-year credit default swaps (CDS) remain below the 600-level, while the yield on the Turkish government’s 10-year eurobonds remains below the 10% level.

 

Main Macro Indicators 2019 2020 Q1-21 Q2 Q3 Q4 2021 Q1-22 Q2 Q3 Q4 2022
GDP Growth (y/y, %) 0.9 1.8 7.3 21.9 7.5 9.1 11.0 7.3 7.6 3.9 - -
Electricity Consumption (y/y, Dec 25) -0.6 0.1 5.7 25.8 11.6 8.9 12.4 4.6 1.2 -3.1 -5.7 -0.8
Employed (active, mn) 26.7 24.1 25.8 26.6 27.1 28.6 27.0 27.9 29.7 28.5 - -
Population (mn) 83.2 83.6 - - - - 84.7 - - - - -
GDP (per capita, $) 9,127 8,599 - - - - 9,539 - - - - -
GDP (current, TRYbn) 4,318 5,047 1,393 1,586 1,915 2,314 7,209 2,496 3,419 4,258 - -
GDP (current prices, $bn) 760 717 189 189 225 199 803 180 219 242 - -
Inflation (y/y, %, eop) 11.8 14.6 16.2 17.5 19.6 36.1 36.1 61.1 78.6 83.5 64.3 64.3
Lira-loans (%, y/y, Dec 23) 13.9 43.3 34.4 17.5 13.7 20.4 20.4 33.2 55.7 68.6 78.0 -
Policy Rate (%, active, eop) 11.4 17.0 19.0 19.0 18.0 14.0 14.0 14.0 14.0 12.0 9.0 9.0
CA Balance ($bn, Oct) 1.67 -35.5 -7.5 -5.9 2.2 -3.7 -14.9 -19.2 -13.3 -9.3 -0.4 -
CA Balance/GDP (%) 0.2 -5.0 -4.0 -3.1 1.0 -1.8 -1.9 -10.7 -6.1 -3.8 - -
Budget (TRYbn, Nov) -124 -173 23 -55 -29 -131 -192 30.8 62.8 -139.1 25.1 -
Budget Balance/GDP (%) -2.9 -3.4 1.6 -3.5 -1.5 -5.7 -2.7 1.2 1.8 -3.3 - -
USD/TRY (eop) 5.95 7.44 8.24 8.70 8.89 13.3 13.3 14.7 16.7 18.5 18.7 18.7

 

Table: Main macro indicators.

 

Data

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