Kavcioglu announced! Inflation forecast unchanged

Şahap Kavcıoğlu, President of the Central Bank of the Republic of Turkey, is making statements at the Bank’s Headquarters to promote the second inflation report of this year. Kavcıoğlu did not change the inflation forecast and said, “We estimate that inflation will be 22.3% by the end of 2023.”

The Central Bank did not change its year-end inflation forecast. Central Bank Governor Şahap Kavcıoğlu announced the year-end inflation forecast as 22.3 percent.

Kavcıoğlu’s statements are as follows:

Rising inflation, along with the decline in prices, determined a downward trend on a global scale. Upside risks in global inflation are kept alive. The decline in global core inflation is slower. Problems in banking caused problems in developed countries. Due to the liquidity support provided by the central banks of developed countries, the downward trend in the balance sheet sizes was interrupted. The Turkish banking system maintains its safe and sound appearance. The criteria, including the return on assets and equity, and the ratio of liquid assets to short-term liabilities, confirm the soundness of the banking sector.

According to the data published by international organizations, our country ranks high among the G20 and OECD countries in 2022. Looking at purchasing, which is the right criterion in international welfare comparisons, Turkey converges to developed countries with per capita income. Our country has succeeded in advancing its high growth together with the increase in productivity. Industrial production continued to strengthen in January 2023.

The relatively flat course of industrial production in the first quarter, when one of the greatest disasters in our history was experienced, is an indicator of the resilience and dynamism of our economy.

Leading indicators point out that the losses in industrial production are being compensated strongly and rapidly with the recovery after the disaster.

The effects of the earthquake disaster on the Turkish economy are evaluated comprehensively. High-frequency data show that the recovery takes place rapidly both in the country and in the disaster area. Our total exports reached the pre-earthquake level.

Leading indicators regarding consumption expenditures in the disaster area recently exceeded pre-earthquake levels, indicating a strong recovery trend in the earthquake area. Survey indicators regarding the strength of the post-earthquake recovery also give positive signals, while the demand expectations for the next three months increase, while the production and demand expectations increase in the centers of the disaster area with a high economic weight.

Türkiye has taken its place among the countries that increased its employment the most in the last two years. Exports from the disaster area, on the other hand, decreased in a few weeks after the earthquake, but as of April, they approached the levels in the same period of the previous year. As a result of strong exports in other provinces, our total exports reached the pre-earthquake level.

The tourism sector continues its strong course in 2023 as well. We anticipate that the increase in tourism revenues and its contribution to the current account balance will continue throughout the year in the upcoming period.

The remainder of 2023 will be a period in which the current account balance gets stronger. The downward trend in inflation was somewhat slower than the path we announced in the previous report. Our indicators for the underlying trend of inflation confirm the apparent slowdown in price increases.

Indicators of not only the underlying trend of inflation but also its spread are also declining. The slowdown in inflation was also reflected in expectations. The import unit value index in TL has recently declined on an annual basis. Cost pressures on inflation have largely disappeared in the recent period.

We will continue to resolutely implement all policy tools in line with our targets for the success of the targeted credit policy. We achieved significant liraization in the deposit structure of the banking sector. We predict that inflation will occur in the range of 18.1-26.5% with a 70% probability by the end of 2023, the midpoint of which is 22.3% (22.3% with the previous range of 17.8-26.9%).

INFLATION FORECAST HAS NOT CHANGED

We estimate that inflation will be 22.3% by the end of 2023 (Previous 22.3%). We estimate that inflation will be 8.8% by the end of 2024 (Previous 8.8%). We predict that inflation will occur in the range of 4.0-13.6% by the end of 2024 with a 70% probability, with a midpoint of 8.8% (8.8% with the previous range of 4.0-13.7%).

We anticipate that exchange rates will provide a stronger improvement in the underlying trend of inflation than our previous report forecasts.

We are in a transition period in which borrowing costs increase and uncertainties on the financial system are high. The Liraization Strategy, which is our monetary policy framework that we have created with incompatible tools and with an understanding of sustainability, increases the ability and resilience of the Turkish economy to realize its potential.

In the upcoming period, the Liraization Strategy, which was created with the perspective of sustainable and permanent price stability, will continue to be implemented with determination. While we determine our policy rates in a way that will ensure the development of production capacity by analyzing the balance of the economy in detail, we ensure that the monetary transfer we aim to function properly with our targeted credit policy and liquidity instruments. We will develop the framework we apply in line with the development of investment, employment, production and exports on the one hand, and in a way that minimizes the demand-side effects of financial resources that hinder these goals, on the other. By creating the financial conditions that will increase the supply capacity, we will bring our current account balance into a structure compatible with permanent price stability.

The policies we implement have the power to reduce inflation. Despite being in a geography where we feel the global shocks more intensely, the fact that our inflation decreases simultaneously with a high economic performance is the biggest indicator of this.

In the upcoming period, we anticipate that our production and current account surplus capacity will develop at the same time, while the decline in inflation will continue, that financial resources will be used in the most efficient way, and that the activities for the recovery of the disaster area will continue with success.

Together, we witness the dynamism and resilience of our country, and the strength of the real sector and banking sector indicators, so that we quickly heal the wounds caused by the earthquake disaster. With the tools offered by the policies we have developed, we will continue to eliminate the factors that will prevent the realization of this prediction and to continue the disinflation process with determination.

QUESTION ANSWER

There is no change in our policies, especially our liraization strategy and other policies will continue in the same way. I think KKM continues very successfully. (KKM) we do not see a problem.

QUESTION ANSWER

There is no change in our policies, especially our liraization strategy and other policies will continue in the same way. I think KKM continues very successfully. (KKM) we do not see a problem.

The most important output of the Turkish Economic Model was based on a current account surplus, that is, on the production, employment and export model.

We do not claim that we will have a current account surplus on the day we started this policy. Turkey has come to the point of having a current account surplus in the last 3 years, incidental situations were pandemics, wars, earthquakes; I’m not saying that to make excuses. Despite such factors, Turkey will start to run a current account surplus and ensure price stability permanently.

We expect a situation that will ensure the current account balance after this month. By 2030, the value that will contribute to the current account balance over 300 billion dollars has been created. We stand behind the estimates we have announced, and we will work together with all stakeholders to realize them. The results of the works in terms of crops are very positive, they will affect the prices very positively.

Such negative news about the Central Bank, about foreign currency, these are not very correct things, however, the balance in the foreign exchange continues and will continue. Despite this, the stability in the KKM continues, the favor of the households continues.

There is no such thing as a binary exchange rate system, the Grand Bazaar is always slightly above the rate of the Central Bank, it sometimes opens and sometimes closes, it is not right to make the headlines of the newspapers before the election as if this is new, the CBRT is the most reputable institution of this country.

There is no problem in gold imports at the moment, as the Central Bank, we are taking the necessary steps regarding the market.

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