Turkey’s central bank raises 2020 inflation forecast

Country’s year-end inflation rate projected at 8.9%

Turkey’s central bank on Wednesday revised its year-end inflation forecast to 8.9% for 2020, up from 7.4%.

The 1.5 percentage point increase is driven by upward revision in oil prices, and food inflation projections, said central bank governor Murat Uysal while presenting the third annual inflation report.

He said the inflation figure is expected to fluctuate between 6.9% and 10.9% this year, and could drop to 6.2% by the end of 2021.

The country’s annual inflation rate in June was 12.6%, while the 12-month rolling rate was 11.88%, according to official figures.

“Even if uncertainties regarding the global economy are taken into account, the second wave of coronavirus will not restrict economic activities as compared to the first,” he said.

The revisions, the governor said, are based on the assumption that there would be no second wave, and the world economy will start recovering.

Capital flows

Uysal said the portfolio flows were relatively more favorable in July with the measures taken by the central banks of the developed countries and the post-epidemic normalization process.

“Capital flows towards developing countries are expected to recover in the second half of 2020 with the effect of the expansionary steps in monetary and fiscal policies,” he explained.

He also pointed out that the pressure on the currencies of developing countries has partially decreased due to the increase in the global risk appetite following the normalization steps.

“We expect a partial improvement in tourism revenues in the coming period with the easing of travel restrictions,” he noted, adding, they expect the recovery in goods exports and low levels of commodity prices to support the current account balance.

Responding to a question about the central bank’s reserves, Uysal stressed the bank’s reserves are sufficient in terms of short-term liabilities.

“As long as the market conditions allows us, we will continue our policy of increasing reserves,” he said.

Considering both current balance developments and balance of payments, and external conditions, he said the bank entered a positive period at this point in the second half of the year.

Anadolu Agency

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