UBS releases 'Dollar/TL' and 'interest rate' forecast for Turkey

Swiss banking giant UBS has shared its assessments regarding the Turkish Lira and the Central Bank's monetary policy.

According to a report in Ekonomim, UBS stated that it expects the Turkish Lira to continue losing value, while emphasizing that it anticipates some easing in the Central Bank of the Republic of Turkey's (TCMB) monetary policy in the second half of 2024.

In a report published on Wednesday, UBS, which projects that Turkey's Gross Domestic Product (GDP) growth rate will decline from an average of 5 percent in the 2022-23 period to 2.4 percent in 2024 and 3.2 percent in 2025, commented, "This slowdown will allow for some correction in macro imbalances and will lead to lower inflation and a smaller external deficit."

DOLLAR AT 39 TL BY THE END OF 2024

In the report, UBS, which predicts that the Turkish Lira will continue to weaken, estimated that the Lira will decline against the dollar to 39 by the end of 2024 and to 48 by the end of 2025.

Predicting that inflation in Turkey will begin to fall starting in the second half of 2024, but that it will reach 41.4 percent by the end of 2024—above the TCMB's forecast of 36 percent—UBS also emphasized that it expects the TCMB to keep the interest rate at 40 percent in the first half of 2024, though it did not rule out the possibility of another interest rate hike.

"With the sharp decline expected in inflation starting from the third quarter of 2024, the TCMB will begin to ease its monetary policy," UBS projected, estimating that the policy rate will fall to 25 percent by the end of 2024.

News Source: 12punto