Next 12 Months Will Be Hard

According to the latest Central Bank Expectations Survey, market participants project that inflation will rise to 57.92% by the end of the year. In the previous survey, the year-end expectation was 46.44%. Quite a remarkable increase indeed.

Thankfully, the inflation expectation after 12 months is 33.28%. So, by this time next year, inflation is expected to be below 35%. Bu it should also be noted that this expectation was 28.41% in the previous survey.

So, what will be the inflation rate two years from now? The CPI expectation of the survey respondents after 24 months is 17.68%. I should say that it’s good news, because in the previous survey, this rate was announced as 19.54%. Apparently, those who have participated in the survey are more hopeful for the next two years.

“No Deterioration in Growth Prospects…”

Now, let’s take a look at the exchange rate expectations: While, in the previous survey period, the respondents were anticipating that USD/TRY exchange rate would be 16.85 by the year-end, they pushed it to 17.57 in the most recent survey. The expectation of USD/TRY for 12 months from today was TRY 17.84 in the previous survey period. But it is recorded as TRY 18.47 in the new survey. This shows us the reason why the inflation expectation after 12 months has gone up compared to the previous survey.

I also have good news: The growth expectation for 2022 was 3.2% in the previous survey, and it increased to 3.3% in the latest survey. The growth expectation for 2023, on the other hand, has not changed, projected to be 4% in the previous and last survey.

Based on these expectations, we could say that although Turkey will not experience major growth problems, the next year will be difficult. Inflation and exchange rates will not be at desired levels until the general elections. However, after the elections, both exchange and inflation rates are expected to calm down. Two years from now, it seems that we will have relatively more favourable economic conditions.