World Economy

Turkey Inflation Climbs More Than Estimated

Turkey Inflation Climbs More Than EstimatedTurkey Inflation Climbs More Than Estimated

Turkey’s consumer price inflation accelerated more than estimated in April as food prices rose. The annual rate of inflation rose to 7.91 percent from 7.61 percent in the previous month, Turkey’s statistics bureau said in a statement on its website.

The median estimate in a Bloomberg survey of 18 economists was 7.65 percent. Food prices increased at an annual rate of 14.36 percent.

Turkey’s central bank governor Erdem Basci on April 30 raised his year-end inflation forecast to 6.8 percent from 5.5 percent, citing a weak lira and higher-than-expected oil prices. He said the worsening inflation outlook still didn’t merit tighter monetary policy.

Basci will probably continue to support the lira with supplementary measures without changing the bank’s benchmark repo rate in the short-term, Odeabank AS chief economist Inanc Sozer said by phone.

“The figures show a clear impact from the weakening of the lira in April and high food prices,” Sozer said. “Now we’re worried about the inflation in May too.”

The lira weakened after the data and was trading 0.4 percent lower at 2.7186 per dollar at 10:02 a.m. in Istanbul, extending the year’s losses to 14.1 percent to become the worst performer among 31 major currencies tracked by Bloomberg.

  Investors Lose Faith

Everyone knows that Argentina, Greece and Ukraine are closest to hell among debt-besieged nations. Now another country is falling into investor purgatory. That’s Turkey.

What a change! Under the leadership of President Recep Tayyip Erdogan, who came to power as prime minister in 2003, the story of Turkey this century has been of robust growth and the mostly fulfilled promise of renewed prosperity.

Not anymore. For the first time in at least a decade, Turkey is simultaneously suffering from slowing economic growth, declining bond and stock markets, a currency that’s performing abysmally, and the perception that its credit is deteriorating, according to data compiled by Bloomberg. Investors no longer are showing confidence in President Erdogan.

The lira has depreciated 13.12 percent so far this year, the worst performance measured in U.S. dollars among the 31 most-traded currencies, according to data compiled by Bloomberg. Weakness is only part of the currency story. As measured by the lira’s implied volatility, or bets on the currency’s future stability, Turkish money is hurtling toward instability faster than any other.

Turkish stocks are plunging while shares of companies from other emerging markets rise. So far this year, the 30 Turkish companies on the nation’s BIST index have fallen 15.6 percent. By comparison, the benchmark for stocks from all the emerging-market countries is up 10.9 percent. Stocks from emerging-market countries in Europe, Africa and the Middle East also are rising, by 8.9 percent measured in U.S. dollars, according to Bloomberg data.