Turkey Economic Outlook
On 6 February, two earthquakes of magnitudes 7.8 and 7.5 struck the southeast of the country, followed by numerous aftershocks. The cataclysm killed nearly 50.000 people and severely damaged more than 100,000 buildings. It has also hampered the economy, with many firms hit by supply disruptions and labor shortages. Moreover, reconstruction efforts will widen the fiscal deficit, while the current account is likely to worsen as exports decline and the country requires more imported goods and increased capital inflows for rebuilding. That said, the catastrophe’s impact on medium and long-term growth is likely to be limited. Despite the tragedy, President Erdogan has indicated that presidential and parliamentary elections will be held on 14 May. In other news, national accounts data revealed that annual economic growth slowed in Q4 2022, dented by the external sector’s weaker performance.
Inflation declined for the fourth successive month in February, coming in at 55.2% (January: 57.7%). The downtick was driven by a broad-based moderation in price increases due to a high base, which should continue to drive down inflation in the coming months. However, inflation will likely remain markedly above the Central Bank’s 5.0% target for the rest of the year.