Page 7 - TURKRptSep21

● Corona: Tourists came but not enough to satisfy Turkey’s needs. New restrictions are on the way due to a new peak, which will hit domestic demand again.
● July 29: The central bank hiked its end-2021 inflation forecast to 14.1% from 12.2% in April. Also, the upper limit on official inflation was moved up from 14.4% to 16%, closer to market expectations.
Following the official inflation release for June at 17.53%, suggesting an increase from the 16.59% in May, the market demands an end-2021 inflation of 16%s at minimum.
The new central bank governor Sahap Kavcioglu reiterated a few times in April that inflation would peak at around 17% in April before easing.
In line with the central bank governor’s guidance, the official inflation for May was released at 16.59%, down from 17.14% in April.
Despite the market’s demand for a rising inflation, the government attempted to go over the Plan A.
The thinking was that a rate cut was on the way at the July 14 meeting after the June inflation release on July 5 confirms a declining trend in official inflation.
Following the official inflation release for June, the Plan A is a history now.
The Turkish government is now supposed to keep its policy rate hold at 19% at the August 12 meeting.
At the moment, Turkey’s official CPI index data does not suggest a declining trend by November although the central bank governor in May promised President Erdogan that rate cuts were in the making for July and August.
In the coming period, it will be watched whether Erdogan will attempt to push his luck.
Turkey’s lira, so often in the news for smashing through unfavourable records, has recently been on good behaviour. It did not break any records during the August liquidity dry. November is an important bend now, prior to the new year rally that will start in December.
● Oct 28: New quarterly inflation report and updated inflation forecast.
● September 3: Official inflation for August (July: 18.95%, June: 17.53%,
May: 16.59%).
Turkey’s indicators are like a discount market. Not 19% (policy rate)
but 18.95%.
Burumcekci: Even without a loss in lira value [from 8.30s seen through the end of July and the beginning of August], inflation may rise to 19-20% in the next three months [August, September, October], with a fall coming only in the final two months [November, December] to end the year at 17-18% at best. If a value-added tax discount due to end in September was not extended, this could exert an upward impact of around 1 percentage point.
7 TURKEY Country Report September 2021 www.intellinews.com