LONDON
Inflation in Türkiye is expected to decline to 15-20% by the middle of next year, according to a senior expert at Fitch Solutions company BMI.
Official figures showed Türkiye’s annual inflation rate plunge from 43.68% in April to 39.59% in May — the lowest since December 2021, when the figure was 36.08%.
Türkiye’s monthly inflation was 0.04% in May, another record low in nearly four years.
Anwita Basu, head of Europe Country Risk at BMI, told Anadolu that annual inflation is forecast to remain in the 35-40% range before it “further declines to about 15% to 20% by sort of mid-2024.”
“The main reason is that we think there will be some Turkish lira depreciation over the next half of this year. It will be managed but it is still going to happen and so that is going to bring up input costs.”
However, she pointed out, food inflation is expected to remain high, like the rest of Europe.
“Food inflation is something we are concerned about due to the drought conditions everywhere in Europe, including Türkiye,” Basu said, adding that food prices had a major part in the overall consumer inflation basket.
The EU’s climate observatory warned in April that two-thirds of Europe’s rivers had fallen to below-average levels, and that 5 cubic meters (about 177 cubic feet) of ice had disappeared from Alpine glaciers last summer.
Barring significant rainfall, the effects of higher temperatures caused by greenhouse gas buildup are already being felt across the world, including southern Europe, where EU studies have shown that soil has become “incredibly dry.”
Energy inflation impact to decline
In Türkiye, Basu said the “general dynamics that we think will play out on the inflation are the food inflation and the developments on Turkish lira,” while also noting that numerous mitigating policies have been put into place.
She also said falling international energy prices and the country’s recent gas discoveries in the Black Sea would further ease inflation pressures in Türkiye.
Turkish authorities announced in April that households would get a month of free natural gas and discounted prices for a year after shipments from the Sakarya field in the southwestern Black Sea first started reaching the country’s shore.
“That is going to have a mitigating factor on inflation, specifically the energy component,” according to Basu, who said they expect oil and gas prices to go down over the next 12 to 24 months in international markets.
With gas prices set to be “much lower” over the next one to two years, “we think energy prices are going to be less of a concern over the coming months,” Basu said.
“But, food inflation could be an offsetting one.”
Basu also noted that BMI, matching the general consensus, expects Türkiye to tighten its monetary policy.
“We think it will be a bit slower, but that is still going to be there,” she said.
