According to the results of a survey conducted last week, Turkey is expected to grow by 3.4% in the second quarter and by 2.5% in the third quarter.
The economists who participated in the survey forecasted a modest 3% growth for 2022 and 3.4% for 2023 as opposed to higher expectations in the previous survey. This anticipation obviously highlights the feared risk of “low growth-high inflation”. were higher.
The same survey also reveals inflation expectations for 2022 and 2023. The inflation forecast for 2022 was revised upward to 55.7% compared to the previous estimate of 43.7%, and for 2023, inflation is expected to turn out 21.8%, a higher rate than the previous prediction of 19.2%. I too have been telling roughly the same rates in each presentation I deliver. But I’m afraid that the inflation train in Turkey might violently go off track this year.
“As Risks Grow, Prices Go Higher, Supply Chain Problem Keeps Getting Worse…”
So, again according to the survey, the ever-escalating tensions between Russia and Ukraine are fuelling the rise in commodity prices and inflation while increasing supply risks. Although there is no demand-pull inflation in Turkey, we could say that consumer prices will hit record high levels and market interest rates too will increase or remain high due to the connection between PPI and CPI.
Everybody fears that their worst estimates are correct, but at the same time everybody fears to talk about these estimates because they are afraid that they will become a reality. Unless we take action soon, we will not achieve any improvement neither in inflation nor interest rates in the short term.