Deutsche Bank: Turkey to experience significant disinflation in coming months
Date
7/17/2024 8:04:27 AM
(MENAFN) Turkey is projected to experience significant disinflation in the coming months and a rebalancing of its Economy without encountering a hard landing, according to a Deutsche bank strategist.
Since the elections last year, Turkey has shifted towards orthodox economic policies aimed at reducing inflation, which surged to 75.45 percent in May from April's 69.8 percent, before falling to 71.60 percent in June. Mehmet Simsek, Turkey’s finance and treasury minister, identified the May figure as the peak before the commencement of a disinflation process.
The Turkish Central Bank forecasts a year-end inflation rate of 38 percent. Speaking to a Turkish news agency, Hans-Christian Wietoska, head of Central Eastern Europe, Middle East, and Africa Research at Deutsche Bank, stated that Turkey has completed the first phase of rebalancing its economy and is now entering the second stage.
"We see inflation at around 40 percent by year-end due to slowing domestic demand, base effects, and the recent stability of the lira. We expect a strong disinflation process," he said. "The key question, and also part of the second stage, is getting inflation to 20 percent. This is the next step, and this is a challenge because 40 percent will be more or less done by the end of the year," Wietoska added, emphasizing the importance of the central bank maintaining a tight monetary stance.
The economy is anticipated to cool down in the second stage, and Wietoska highlighted the importance of the central bank's response during this period. Deutsche Bank economists predict Turkey’s GDP growth at 3.5 percent this year, compared to an average growth rate of around 5 percent over the past five years.
The International Monetary Fund (IMF) expects Turkey’s economy to grow by 3.6 percent, while the Organization for Economic Co-operation and Development (OECD) forecasts 3.4 percent growth in 2024.
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