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Fitch Maintains Pessimistic Forecast for Turkish Inflation

Fitch Maintains Pessimistic Forecast for Turkish Inflation

Saturday, 18 September, 2021 - 09:00
The Turkish President is facing huge pressures to confront price gouging (AFP)

Fitch Ratings revised up Turkey's 2021 economic growth forecast to 9.2 percent, according to the rating agency's Global Economic Outlook for September, released on Sept. 16.

The new figure is a massive upward revision from the agency's previous upgrade made on Aug. 13 when it revised up Turkey's growth forecast to 7.9 percent.

Fitch noted that it expects Turkey's gross domestic product growth to slow to 3.5 percent in 2022, but then recover to 4.5 percent in 2023.

The agency estimates inflation in Turkey to come at 17.2 percent this year, and 13.4 percent next year, and then 10.5 percent in 2023.

"At 19.25 percent in August, the annual inflation was well above the central bank’s target and just in excess of the policy interest rate at 19 percent," the report said.

The bank faces double pressures between the inability to curb inflation and the pressures of Turkish President Recep Tayyip Erdogan’s orders to cut the interest rate.

Erdogan asserts that any cut in the interest rate would reduce inflation as well as revive the deteriorating Turkish lira.

Erdogan is facing pressures concerning inflation, specifically that of food price inflation which well exceeded 30 percent. He pledged to stand against price gouging.

Turkey's economy grew a massive 21.7 percent year-on-year in the second quarter. However, the opposition doubted this, given the current economic condition and the suffering of citizens.

International credit ratings agency Moody’s upgraded Turkey's 2021 economic growth forecast from 5 percent to 6 percent.

In its Global Macro Outlook 2021-2022 report, Moody’s also revised Turkey’s growth expectation for 2022 from 3.5 percent to 3.6 percent.

It noted that a recovery in the tourism sector supported the growth in the Turkish economy thanks to the ongoing global economic recovery and progress in COVID-19 vaccination.

Turkey's foreign trade deficit widened 51.3 percent year-on-year in July to $4.278 billion according to the general trade system, data from the Turkish Statistical Institute showed on Tuesday.

After the damage to trade a year earlier as the result of the COVID-19 pandemic, Turkey's exports climbed 10.2 percent and imports rose 16.8 percent compared with July 2020, the institute said.

In the first seven months of the year, the trade deficit narrowed 4.7 percent to $26.72 billion.

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