Turkey sees inflation at 65% at the end of 2022

ISTANBUL (Reuters): Turkey expects inflation to ease to 65 percent by the end of the year from nearly 80 percent in July, while the current account deficit is seen at $47.3 billion in 2022, government forecasts showed on Sunday.

President Recep Tayyip Erdogan’s new economic model has prioritized growth, exports, employment and investment while seeking to cut interest rates.

The central bank’s easing cycle last year led to the lira sinking 44 percent against the dollar by the end of December, and it is down more than 27 percent again so far this year.

The weakening lira and the rise in global energy and commodity prices have led to a surge in inflation, which hit nearly 80 percent in July is expected rise further before easing.

Ankara foresees inflation declining to 65 percent by the end of 2022, and falling sharply to 24.9 percent at the end of 2023, according to the so-called medium-term program, or OVP.

Erdogan’s model aims to flip Turkey’s chronic current account deficits to a surplus. But the rise in global prices has made that target difficult to achieve.

The trade deficit for 2022 was seen at $105 billion, more than double the amount last year. It was seen narrowing to $80 billion in 2023.

The current account deficit was expected to stand at $47.3 billion in 2022, which is more than triple the level in 2021 and would be the highest annual deficit since 2013. It was seen narrowing to $22 billion in 2023.

The budget deficit was seen sharply higher at 461.2 billion lira ($25.4 billion) in 2022 despite a supplementary budget this year. It was seen widening to 659.4 billion lira in 2023.

Excluding income and outflows due to interest, as well as some other factors, the deficit was seen at 294.3 billion lira in 2022 and 323.6 billion lira in 2023.