British bank Barclays releases exchange rate and interest rate forecast for Turkey

British bank Barclays has revised its dollar/TL and policy interest rate forecasts. Accordingly, the bank announced that it expects an increase in both the exchange rate and interest rates due to high inflation and a high current account deficit.

Barclays projects that the Central Bank's (TCMB) policy interest rate, which is currently at 24 percent, will rise to 35 percent by the end of this year and to 40 percent next year.

For Turkey, it expects the dollar exchange rate to rise to 29 by the end of 2023, 32 in March 2024, 35 in June 2024, and 39 in September 2024.

'PERMISSION FOR DEVALUATION IN TL AT LEAST EQUAL TO THE INFLATION DIFFERENTIAL'

Stating that they expect a loss of value in the TL in an environment of high and persistent inflation, bank analysts emphasized that the economic management in Turkey is prioritizing the reduction of the current account deficit, and therefore they expect them to allow for a devaluation in the TL at least equal to the inflation differential.

The note also pointed out that there are upside risks to the dollar/TL forecasts depending on the possibility of a renewed rise in dollarization.

The annual average dollar exchange rate implied in the Medium-Term Program (OVP) announced last week was 23.88 for 2023, 36.78 for 2024, 43.94 for 2025, and 47.80 for 2026.

News Source: 12punto