24 April: A Reuters poll of economists predicts that Turkey’s inflation will remain high at 46% by the end of 2023, even as the central bank is expected to raise interest rates after the June elections. Find out more about Turkey’s economic outlook and challenges in this article.
Turkey’s inflation is expected to stay elevated at 46% by the end of 2023, according to a Reuters poll of economists. The median estimate of 15 economists in the poll was up from 41% in a previous poll conducted in March. The forecast was well above the central bank’s target of 5% and the government’s medium-term programme projection of 9.8%.
Inflation has been soaring in Turkey due to high food and energy prices, a weak lira currency, and supply disruptions caused by the Ukraine war and the coronavirus pandemic. In March, annual inflation hit 64.2%, the highest level since October 1998.
Interest rate outlook
The central bank has kept its policy rate at 19% since March, when it raised it by 200 basis points to curb inflation and support the lira. However, the poll showed that the central bank is expected to hike rates further to 21% by the end of the year, as inflation pressures persist.
President Tayyip Erdogan, who faces presidential and parliamentary elections in June, has repeatedly called for lower interest rates to boost economic growth, which he sees as a key factor for his political survival. He has also pledged to respect the central bank’s independence and fight inflation.
Economic growth and current account deficit
The poll also showed that Turkey’s economy is expected to grow by 4.5% in 2023, down from an estimated 6.5% in 2022, as domestic demand moderates and external risks increase. The current account deficit, which reflects Turkey’s dependence on foreign financing, is expected to widen to 6.2% of gross domestic product (GDP) in 2023 from 5.8% in 2022.