(Bloomberg) — Turkey is lowering growth forecasts for this year and next as it tries to rein in runaway inflation.
It’s unclear how much of a revision authorities will announce in the government’s new Medium-Term Program, though they are keen to avoid a sharp slowdown even as they focus on inflation.
Gross domestic product growth forecasts are set to be lower than the current predictions of 4% for this year and 4.5% for 2025, according to a person familiar with the plans, who asked not to be identified as the figures have yet to be made public.
The size of those revisions will be crucial for investors, who are trying to gauge the extent to which Turkish authorities are willing to sacrifice growth to curb price gains. The central bank has left its benchmark interest rate unchanged at 50% for the last five months with inflation still running at over 60%, 12 times the official target.
Turkey Has Decision to Make Soon to Show If Inflation Fight Real
The new three-year outlook to be unveiled in the program — probably in early September — is key to understanding “the political will” authorities have for the ongoing adjustment in the economy, said Garanti BBVA Research in an emailed report. GDP data for the second quarter will be published on Monday, when Garanti economists expect to see a quarterly contraction of 0.5% to 1%.
Even with lower growth, Turkish authorities see unemployment at the end of 2024 to be lower than the current prediction of 10.3%, the person said.
The government declined to comment on the new medium-term program.
President Recep Tayyip Erdogan has in recent years prioritized elevated levels of growth at the expense of price stability. Although authorities adopted a more orthodox policy mix after Erdogan’s reelection last year, economic growth has barely dipped below 4%.
Activity has largely been supported by household consumption, partly fueled by expectation of higher prices in the future.
–With assistance from Beril Akman.
©2024 Bloomberg L.P.
