Turkey’s inflation will be higher than previously forecast this year and in 2015, although falling oil prices could temper its rise, the Central Bank of Turkey said, pledging to keep policy tight until the inflation outlook improves.
Presenting the bank’s quarterly inflation report, Governor Erdem Basci said inflation was now expected to be around 8.9 percent at the end of 2014, an upwards revision from a mid-point forecast of 7.6 percent in its July report.
Basci cited higher food prices resulting from bad weather and lagged effects of currency depreciation as the main reasons for the change in this year’s forecast. The bank sees food prices rising 12.5 percent this year, more than the 9 percent it had previously expected. The inflation forecast for 2015 was increased to 6.1 percent from 5 percent previously, while the bank’s medium-term inflation forecast remained at 5 percent, Basci said.
Revised
The new projections were lower than the inflation forecasts of 9.4 percent for 2014 and 6.3 percent for 2015 included in the medium-term program, unveiled by Deputy Prime Minister Ali Babacan on Oct. 8.
The bank revised downwards its oil price forecasts, to $102 per barrel for 2014 from $108 previously and to $92 per barrel for 2015 from $106. Furthermore, he said cheaper oil would limit upward pressure on inflation for this and next year. Turkey imports almost all its energy.
Inflation has remained stubbornly high even though interest rates are considerably above their levels of a year ago. The central bank left its key rates unchanged at its latest policy meeting last week.
Trade Gap
The foreign trade deficit fell by 8.4 percent in September compared to the same month of the previous year to reach $6.93 billion, a report released by the Turkish Statistics Institute (TurkStat) indicated.
The figure was $7.65 billion in September of last year. According to the data, which was prepared by TurkStat with the cooperation of the Ministry of Customs and Trade, Turkish exports increased by 4.6 percent and reached $13.66 billion year-on-year in September, while imports registered a slight decrease -- 0.2 percent -- to reach $20.59 billion in the same period. The export-import coverage ratio rose to 66.4 percent in September from 63.3 percent last September.
The data also revealed that seasonally and calendar adjusted exports had increased by 4.8 percent, while imports in September fell by 1 percent compared to the previous month. Considering the annual change in trade figures with calendar and seasonally adjusted data, exports increased by 1.4 percent in September and imports fell by 4.1 percent in the same period.
