Fitch shares inflation outlook: Above forecasts

Erich Arispe Morales, Senior Director and Turkey Analyst at international credit rating agency Fitch Ratings, evaluated Turkey's current economic policies and spoke about inflation expectations. Morales stated, "The effectiveness of the policy shift, the improvement in reserve levels, the reduction of foreign exchange-protected deposits without increasing dollarization, the narrowing of the current account deficit, and developments regarding the easing of inflation expectations confirm the assessment we announced last Friday."

"WE SAW AN INCREASE IN PUBLIC SPENDING AND CREDIT CARD USAGE"

Morales noted that inflation remains the primary policy challenge for the Turkish economy, despite expectations of a significant decline over the next few years, and added the following:

"The inflation we saw in the first two months of this year reflected some policy measures implemented since the end of last year. One of these was the 49 percent hike in the minimum wage at the beginning of the year. This gave some momentum to domestic demand and household consumption. We also saw an increase in public spending and credit card usage. We are aware that these factors led to an increase in inflationary pressures in the first two months of the year."

On the other hand, stating that Fitch Ratings' inflation expectation is at the 40 percent level, compared to the TCMB's 36 percent projection, Morales said, "We expect inflation to average 58 percent this year and fall to 29 percent. However, inflation remains a fundamental policy issue for Turkey, not just for this year and next, but in the medium term."

News Source: 12punto