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Turkish Central Bank poll sees higher growth and inflation, lower lira

14th November 2017

The year-end forecast poll conducted by the Central Bank of the Republic of Turkey (CBRT) in November saw higher economic growth; however, economists and representatives from the real estate and finance sectors also predicted higher inflation and lower Turkish lira, which are likely to upset consumers.

The results of the poll released Monday showed the year-end growth forecast rising from 5.2 percent in October's poll to 5.5 percent. However, the expectation for 2018 slightly dropped from 4.3 percent to 4.2 percent.

According to the Turkish Statistical Institute, Turkey's economy grew by 5.2 and 5.1 percent in the first and second quarters of 2017, making the country the third fastest-growing economy among the G-20. The strong growth data also pushed various international organizations and finance institutions to revise their growth forecasts for Turkey to near 5 percent.

The consumer price index (CPI) is expected to stand at 10.68 percent, rising from the previous forecast of 9.89 percent. The annual inflation rate in October was 11.9 percent, the highest rate since October 2008, with the rate stuck in double digits throughout the year except January and July at 9.22 and 9.79 percent, respectively.

The monthly inflation prediction for November rose from 0.60 percent to 0.75, whereas the forecast for December fell to 0.43 percent from the previous 0.51 rate. The CPI is expected to increase by 1.27 percent in January, significantly lower than 2.46 percent rate in January 2017.

The 12-month and 24-month inflation forecasts also increased from 8.52 percent to 8.65 percent and 7.98 percent to 8.25 percent, respectively.

The year-end current account deficit forecast increased from $38 billion to $39 billion. According to the CBRT statement released the same day, Turkey's current account deficit reached over $4.5 billion in September 2017, up by almost $3 billion on a year-on-year basis, bringing the 12-month rolling deficit to $39.3 billion.

The previous poll saw the year-end U.S. dollar and Turkish lira parity rate at 3.7165, whereas this month the forecast rose to 3.8624. The rate was at 3.8860 on Monday. The 12-month and 24-month forecasts were 3.8757 lira and 4.0819 lira.

The repo rate forecast for the current month and upcoming three, six, 12 and 24 months remained unchanged at 8 percent.


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