Middle East

Turkey’s chief financial officer says apocalypse is wrong about inflation

Turkey’s newly appointed chief financial officer said inflation in the country peaked months earlier, much lower than expected by top Wall Street banks.
Finance Minister Nureddin Nebati presented the agenda to put the price in the spotlight and remove some of the pressure from the central bank, after its implementation in Lira affected the fastest inflation in almost 20 years.
Consumer prices haven’t accelerated since this month, and should remain almost flat until seasonal improvements in food prices lead to a general slowdown in the summer, Nevaty said in an interview Thursday.
The scenario may seem exaggerated after Lira loses half of its value in three months and price-adjusted interest rates are well below zero in the coming months.
There is also the view that they are facing growing pessimism from JP Morgan Chase and Company and Goldman Sachs Group, Inc. Their economists predict that last year’s currency crisis could lead to more than 50% inflation in the first half of the year. Last year it ended at 36. % – And little relief is expected until late 2022.
“We need to wait for what happens in January, February and March,” Nevaty said when he suggested the direction of short-term central banking policy.
The bank’s next policy meeting is scheduled for January 20th.
Nevaty captured the evolution of the new economic program announced by President Recep Tayyip Erdogan in late 2021 in his first interviews with foreign media since he was appointed as a financial expert last month.
Erdogan’s goal is to boost growth and free the economy from the higher interest rate burden imposed on Turkey by the “Baron of Global Finance”.
The Treasury’s top priority in recent weeks has been to stop the decline of Lira. Last month’s emergency measures under Nevaty’s stewardship, including a government program to protect Lira’s savings from currency depreciation, have provided some stability to the market.
“Now we need to focus on inflation,” Nevaty said. “There is no problem with the exchange rate. It is moving in its own direction.”
The 58-year-old Berat Albayrak was the son-in-law of Prime Minister Erdogan, who had been the economic emperor of Turkey for more than two years until his sudden resignation in November 2020.
The Nevaty family runs a textile business, and the minister had a board of directors in Musiad, a business group that has historically been closely associated with the Turkish Conservative Party.
Nevaty now has to enter the role of finance minister and keep track of prices with inflation, which is at the heart of political and economic debates around the world.
Inflation is a deep-seated problem in Turkey. Following four aggressive rate cuts that lowered the benchmark by 500 basis points since September, the central bank suspended easing until the end of March to assess the outcome of monetary stimulus.
With Lira no longer free-falling, Nevaty expects Lira’s weaknesses and rising energy costs to lead to inflation in January, leading to a natural decline to more manageable levels by the end of 2022.
“There is only one left, it’s inflation,” Nevaty said. “We will participate in the general election in June 2023 with single-digit inflation.”
Prime Minister Erdogan argues that Turkey is at the mercy of foreign capital and should no longer prioritize higher interest rates and stronger inflows. The president has an unorthodox belief that lower borrowing costs will help slow inflation. This is the exact opposite of the consensus view among the world’s central bankers.
However, the market turmoil was calm and emergency measures were announced to detain the currency.
“No one expected a run so strong in Lira,” Nevaty said. “We have solved the exchange rate problem. Now our priority is inflation.”
The government will continue to revitalize the economy, but this credit stimulus is “selective,” he said.
The credit guarantee fund, which gives businesses access to borrowing with government support, will announce a new loan package by the end of January, Nevaty said. Manufacturers in key sectors will benefit from those cheaper loans, he said.
The ministry also said it would inject capital to help leading state banks continue to lend to businesses and announce the scale of the boost by the end of January.
“2022 will be a year of improvement, stability and things going back on track,” Nevaty said.

Lira companies as ministers expect inflation to peak

Lira remained strong on Friday after Turkey’s finance minister said inflation peaked in January and reached single digits by the June 2023 election, but major surveys show that it was at the end of this year. Inflation is still around 30%.
Lira rose 0.3% to $ 13.58 by 0925 GMT.
Last year it weakened by 44%, and last month the currency crisis stopped following currency intervention and a government scheme to protect lira deposits from weak foreign exchange.
Minister Nureddin Nebati told Bloomberg in an interview that the Lira facility had raised 126 billion lira ($ 9.3 billion), 15% of which came from foreign currency accounts and about 300,000 people participated in the project. Was done.
The capital increase work of the state-owned bank will be completed by the end of the month.
Inflation is expected to surge to 36% in December, the highest in 19 years, and reach up to 50% in the coming months, driven by the plunge in Lira.
But Mr. Nevaty said it would ease as summer approaches.
“We are currently carrying a hump in December. Summer will be a time when both effects will be mitigated, both in terms of food price easing and global inflation,” he said. It forecasts single-digit inflation by the elections scheduled for June. ..
According to a survey by the Central Bank on Friday, the rate of increase in consumer prices at the end of 2022 was 29.75%.
The November and December lira crisis was triggered by a central bank rate cut of 500 basis points to 14% since September.
The surge in living expenses squeezed into household income and urged government measures such as raising the 2022 minimum monthly wage to 4,250 lira ($ 275.44) by 50% to offset tensions.

http://www.gulf-times.com/story/707950/Turkey-s-finance-chief-says-doomsayers-are-wrong-a Turkey’s chief financial officer says apocalypse is wrong about inflation

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