ANKARA (Reuters) – Turkey on Wednesday raised its inflation forecast and lowered its forecast for economic growth, a sign that President Recep Tayyip Erdogan appears to approve of recent sharp interest rate hikes that marked a reversal towards a more orthodox financial policy.
The Turkish government expects annual inflation to reach 65% by the end of the year before slowing to 33% next year. In its forecasts published a year ago, it expected increases of 24.9% and 13.8% respectively.
The forecast for gross domestic product (GDP) growth was lowered to 4.4% this year and 4% next year – still above most economists’ expectations – from forecasts of +5% and +5.5% previously.
The current account deficit is expected to rise to $42.5 billion (€39.69 billion) in 2023 and $34.7 billion in 2024.
“With the support of a tight monetary policy, we will bring inflation back to single digits and we will improve the current account balance,” said Recep Tayyip Erdogan, presenting his “annual medium-term program”.
“We will not compromise on economic growth during the period covered by this program,” he added.
The comments mark a rhetorical turn for the Turkish president, who for years openly opposed high interest rates.
After his re-election in May, Recep Tayyip Erdogan, faced with deep economic tensions and severely reduced foreign exchange reserves, instructed Finance Minister Mehmet Simsek and Central Bank Governor Hafize Gaye Erkan to begin raising the rates and to free the bond and foreign exchange markets.
(Report Daren Butler and Can Sezer in Istanbul; written by Jonathan Spicer; French version Augustin Turpin, edited by Blandine Hénault)
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