Turkey revises inflation projection upwards amid challenges

Ankara: Turkey's central bank has raised its inflation projections for 2023 and 2024, a move that experts said reflected the country's challenges in containing its rising prices.

The central bank now anticipates inflation to end the year at 65 per cent, up from its previous estimate of 58 per cent, with a revised forecast of 36 per cent for 2024, up from 33 per cent, reports Xinhua news agency.

"Controlling high and volatile inflation will be a long and challenging process," Hafize Gaye Erkan, governor of the bank, told a press conference in Ankara to unveil the last quarterly inflation report of the year.

Erkan attributed the revision primarily to elevated food and energy import costs, and the depreciation of the Turkish lira, which fell to a record low of 28.35 liras per dollar on Thursday.

Official data revealed that Turkey's annual inflation rate rose for the third consecutive month to 61.53 per cent in September, marking the highest level this year.

In the face of persistent inflation, the central bank governor pledged to maintain monetary tightening policies and expects a decrease in high inflation by May 2024.

President Recep Tayyip Erdogan, who had advocated for low borrowing rates, has shifted to more conventional economic policies following his re-election in May and appointed market-friendly economists like Erkan and Finance Minister Mehmet Simsek at the helm of the economy.

Since June, the central bank hiked aggressively the policy rate from 8.5 per cent to 35 per cent in five consecutive increases to curb runaway inflation that fueled a cost-of-living crisis in the country impacting millions of households.

Earlier this week, Simsek unveiled plans for the privatization of infrastructure projects such as highways, bridges, and certain hydroelectric power plants to reduce the current account deficit.

Moreover, the government has been seeking ways to curb the chronic trade imbalance by lowering dependence on energy imports. In the first seven months of 2023, the current account deficit reached $42.3 billion, according to official data.