Turkey’s inflation rate pace slows but hits high of 62%

Turkey’s annual inflation rate hit 61.53 percent in September 2023, compared with 49.86 percent in the same month last year, according to the Turkish Statistical Institute.

Although inflation reached a new high, the pace of increase has slowed, pointing to the positive impact of the shift in economic policymaking post-election.

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The month-on-month rise slowed to 4.8 percent in September from 9.1 percent in August and 9.5 percent in July, the data from the government’s official statistics agency showed.

“The small rise in inflation to 61.5 percent last month, from 58.9 percent in August, provides the first signs that the inflation spike is close to leveling off,” the Daily Sabah newspaper reported, citing Capital Economics analyst William Jackson.

Housing inflation was at 20.16 percent. Hotels, cafes and restaurants reported the highest annual increase of 92.48 percent.

Core inflation, excluding volatile items such as food and energy, rose 68.9 percent in September from 64.9 percent in August.

The central bank has revised its year-end inflation forecast to 58 percent from its previous estimate of 22.3 percent.

S&P Global Ratings has revised its outlook on Turkey to “stable” from “negative,” citing policy shifts by the country, and affirmed its rating at “B”.

Turkey’s new economic team is “enacting measures aimed at cooling the overheated economy and stabilising the exchange rate without undermining financial and fiscal stability”, the ratings agency said.

The European Bank for Reconstruction and Development last month raised Turkey’s 2023 GDP growth forecast to 3.5 percent, up from a previous estimation of 2.5 percent.

“Expansionary policies undertaken in the context of the new economic model over the past two years contributed to a relatively strong economic performance by Turkey, but they also exacerbated existing macroeconomic vulnerabilities,” the report stated.

Economic measures enacted include interest rate hikes, increasing policy rates from 8.5 percent in May to 25 percent in September 2023, higher taxes, including increasing value-added tax from 18 percent to 20 percent, among others.