Bloomberg assessment of the Medium-Term Program: Growth forecast to be lowered, inflation to be raised
According to a source speaking to Bloomberg, it is claimed that the growth forecast in the new Medium-Term Program to be announced next month will be lowered, while the year-end inflation forecast will be increased by 10 points.
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As Turkey attempts to curb rising inflation, it will lower its growth forecasts for this year and next. It is unclear how much of a revision officials will announce in the government's new Medium-Term Program, but they are looking to avoid a sharp slowdown even while focusing on inflation. According to a person familiar with the plans who asked not to be named because the figures have not yet been made public, gross domestic product growth forecasts will be lower than the current estimates of 4 percent for this year and 4.5 percent for 2025.
The scale of these revisions will be crucial for investors trying to gauge the extent to which officials are willing to sacrifice growth to curb price increases.
UNEMPLOYMENT EXPECTED TO FALL
While the Central Bank has kept the interest rate steady at 50 percent for the last five months, inflation is still hovering above 60 percent, which is 12 times the official target. According to a report emailed by Garanti BBVA Research, the new three-year outlook, which will likely be announced in early September, is key to understanding the political will officials have for the ongoing adjustment in the economy.
According to second-quarter GDP data to be released on Monday, Garanti economists expect a contraction of between 0.5 and 1 percent on a quarterly basis. Despite lower growth, officials project that unemployment will fall by the end of 2024.
Other planned changes
The end-of-2025 inflation forecast will be revised from 15.2 percent to a range of 15-20 percent.
The year-end inflation forecast for 2024 will be revised upward by approximately 10 points from the current level of 33 percent.
The current account deficit to GDP ratio will be lowered from the current forecast of 3.1 percent for the end of this year to between 1.5 and 2 percent.
The budget deficit to GDP ratio will be lowered from 6.4 percent this year to below 5 percent; the target for next year will be around 3 percent.