Turkey: Business confidence stays pessimistic in December
December 26, 2018
The Real Sector Confidence Index published by the Central Bank declined from 92.8 in November to 91.5 in December. As a result, the index moved further below the 100-point threshold that separates optimism from pessimism, with firms still feeling the aftereffects of August’s currency crisis.
The dip came on the back of greater pessimism regarding the general business situation, as well as output and employment over the next three months. In contrast, firms grew more positive regarding current orders and export orders over the next three months.
In terms of prices, firms’ inflation expectations for the next 12 months declined notably, from 28.1% in November to 24.9% in December. This reassessment was likely driven by tighter monetary policy, weak economic momentum and early signs that the government’s anti-inflation campaign has put at least temporary downward pressure on prices. A further fall in inflation expectations going forward—which will feed through to price-setting behavior—will be key to returning inflation to more manageable levels.
Author: Oliver Reynolds, Economist