Turkey: Inflation climbs further into double-digit territory in April
May 3, 2018
Consumer prices rose 1.87% from the previous month in April, up from March’s 0.99% rise and overshooting analysts’ expectations. April’s uptick came on the back of significant price rises for clothing and footwear, transportation and furnishing and household equipment. Prices for food and non-alcoholic beverages fell slightly month-on-month.
Inflation reared up again in April following four consecutive monthly slowdowns which were driven in part by a sizeable base effect. Inflation came in at 10.9%, up from March’s 10.2% and substantially exceeding market expectations. Worryingly, core inflation also rose sharply, from 11.4% in March to 12.2% in April. Elevated price pressure are being driven by substantial fiscal stimulus—which looks set to ramp up further ahead of June’s snap elections—and the sustained depreciation of the lira, which sank to a record low against the dollar on release of April’s inflation figures. Annual average inflation remained at 11.1% in April.
Looking ahead, inflation is likely to remain high in the short term despite tighter monetary policy, on the back of strong domestic demand, elevated oil prices, a weak lira and higher inflation expectations.
Turkey Inflation Forecast
The Central Bank of the Republic of Turkey recently raised its inflation forecasts, and now expects inflation to end this year at 8.4%, before dipping to 6.5% by end-2019. FocusEconomics panelists are less sanguine, and see inflation closing 2018 at 9.3% and 2019 at 8.5%.
Author: Oliver Reynolds, Economist