Turkish Finance Ministry expects inflation at 40%

Posted 24 January, 2022

Turkey's Treasury and Finance Minister Nureddin Nebati said Turkey's inflation in February will be high but will fall by 14 percentage points by the end of the year, while the minister expects domestic inflation to reach 40% per annum for several months.

While stating that reducing inflation to single digits is one of the objectives of the program, Minister Nureddin Nebati stressed that high inflation is a common problem and that many countries experience negative real interest rates.

"The main goals of the new economic model are balanced and sustainable growth, a sound credit policy, an improvement in the investment environment, a reduction in inflation to single digits, an improvement in the structure with an emphasis on external demand. In a year, we will see together that we will get the expected results of this model. When we will come to the optimal point, of course, we will consider the possibility of ending deposits protected by currency, but we have not yet reached this point, ”Bloomberg quoted Nebati as saying.

The minister noted that inflation in Turkey "may remain at the level of 40% for several months", but he does not rule out that "it will rise to 50%."

"In February, the loan will be high but will decrease by 14 points at the end of the year, in December. Food inflation will decrease due to the absence of a drought," he said.

In the past year, after several consecutive cuts in the discount rate of the central bank, the depreciation of the national currency accelerated sharply, which had a negative impact on the country's financial system. Thus, the collapse of the Turkish lira on November 23 by 18% was the highest in the last 20 years. The dollar exchange rate reached a record 18.4 lira on December 20, while in January last year it was worth 7.4 lire. A number of experts expressed fear that such a situation could cause a sharp jump in unemployment.

However, after statements by Turkish President Tayyip Erdogan about measures to counter the volatility of the exchange rate, the lira jumped sharply at the end of December. Inflation on the back of fluctuations in the lira accelerated in 2021 to 36.08%. Last Saturday, Erdogan said that the problem of high prices and inflation in the country would be resolved as soon as possible.

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