binance left Coinmarketcap net_left adver left

Expectations for the Turkish Economy in 2022: Is There a Plan for Inflation?

Tuesday, December 28, 2021
Expectations for the Turkish Economy in 2022: Is There a Plan for Inflation? © Reuters.

By Tuna Yilmaz and Senay Serefoglu

2021 was a year with rising inflation and an economic slowdown. If the recovery in inflation in the first half of the year was due to base effects compared to the drop at the start of the pandemic, disruptions in the supply chain and a rise in commodity and food prices in the second half led to continued rising consumer and producer prices. While the rise is anticipated to sustain in the first quarter of 2022, it is expected there may be divergences due to monetary and fiscal policy from the second quarter and beyond.

In 2021, many central banks in developing nations increased interest rates due to high inflation. There were also some that avoided hiking rates, but the only central bank to cut interest rates during this period was the Turkish central bank (CBRT). This even though Turkey is one of the countries with the highest inflation, interest rates, and risk premia.

The tension between the CBRT and the Turkish government first appeared in 2013. President Erdoğan has dismissed central bank governors on numerous occasions because he did not find higher interest rates permissible and saw them as an obstacle to investments.

Financial markets welcomed the appointment of Governor Naci Ağbal in November 2020. Ağbal implemented tight monetary policy and there was a decline in the exchange rate. However, even though there was a rapid rise in the US bond yields in February and March which put pressure on assets of developing countries in those months, there was no negative divergence in the Turkish lira like there is today. Ağbal’s continued interest rate hikes resulted in his dismissal, and caused the markets to lose faith that the central bank was operating independently.

It is also necessary to mention the period before the current governor, Şahap Kavcıoğlu. Lütfi Elvan, who was appointed finance minister after Berat Albayrak’s resignation was generally accepted by the markets. However, he was also dismissed because he did not support the government’s policy stance.

The Turkish lira, which had recovered in the November 2020 to March 2021 period, began to weaken as Kavcıoğlu, who supported low interest rates, assumed the central bank governorship. Although the interest rate was kept constant until the September meeting, both Erdoğan’s statements and the markets expectation of interest rate cuts at each meeting weakened the lira.

As we arrived in September, inflation in almost every country hit its highest levels in years, while the impact of the pandemic reared its head again amid new variants. Countries also faced problems due to global supply chain issues. During this period, the CBRT signaled an interest rate cut with its focus moving from headline to core inflation. The lira accelerated losses with Erdoğan stating that “interest rates should be even lower.”

In November, the rise in USD/TRY accelerated as the interest rate cuts took effect and the situation was described as a “war”. While it was not known who was fighting what, a new economic model was discussed. Every speech caused further depreciation in the lira, because the main objective was not inflation. 

What is the plan and will it address inflation?

Until the end of the first quarter of 2022, the current policy will continue and the Turkish Central Bank will not hike interest rates. Investments are expected to create a surplus in exports, higher tourism revenues and low interest on debts.

How should it be read that there is no strategy to reduce inflation in the new plan while the priority of the central bank is to ensure price stability? How can it be believed that the economic plan will proceed in a healthy way?

If President Erdoğan persists with this approach, by the end of the first quarter inflation could be approaching 30%. Ultimately, it seems inevitable that an increase in interest rates will be required at some point in the future, but will this be with a new central bank governor or the incumbent?

Since the CBRT has stepped away from the global risks and its own inflation target, it may be necessary to act with aggressive interest rate hikes, but until this period, the rise in USD/TRY may continue.

2021 is not over yet but USD/TRY exceeded 18.00 in December and had risen over 100% before Erdoğan’s recent measures. A similar deterioration was experienced in the 2001 crisis, the result of political intervention that had a negative impact on the economy.

While the markets prefer monetary and fiscal policy in line with economic fundamentals, they also seek policymakers with the authority to make independent decisions. If Turkey applies the right policy, with the right people, at the right time then the economy can benefit. The biggest problem facing the economy right now is that those conditions are not in place.

2022 is expected to be a year of high inflation in Turkey. Unfortunately, a year with runaway inflation will decrease the purchasing power of citizens and the exchange rate will remain volatile. The sooner the current policy is abandoned to focus on inflation, the better.

Read alsoInflation, Omicron, Rate Hikes: What To Expect From 2022

See our full outlook series here.

Leave your comment
ig right nyse right Neteller adver right
APPROVED BROKERS
rakuten_main right top net_home_top ig_main right top Binance _ main right top fbs_main right top tifia_main right top
27-01-2022 02:47:36 (UTC+7)

EUR/USD

1.1209

-0.0028 (-0.25%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (10)

EUR/USD

1.1209

-0.0028 (-0.25%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (10)

GBP/USD

1.3420

-0.0040 (-0.30%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (2)

Sell (5)

USD/JPY

114.78

+0.14 (+0.13%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

AUD/USD

0.7071

-0.0043 (-0.60%)

Summary

↑ Sell

Moving Avg:

Buy (2)

Sell (10)

Indicators:

Buy (2)

Sell (5)

USD/CAD

1.2719

+0.0054 (+0.43%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (5)

Sell (1)

EUR/JPY

128.65

-0.16 (-0.12%)

Summary

Neutral

Moving Avg:

Buy (5)

Sell (7)

Indicators:

Buy (3)

Sell (2)

EUR/CHF

1.0378

-0.0004 (-0.04%)

Summary

Neutral

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (1)

Sell (6)

Gold Futures

1,809.95

-19.75 (-1.08%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (0)

Sell (10)

Silver Futures

23.163

-0.644 (-2.71%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (9)

Copper Futures

4.4340

-0.0810 (-1.79%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (1)

Sell (5)

Crude Oil WTI Futures

87.04

-0.31 (-0.35%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

Brent Oil Futures

88.46

-0.28 (-0.32%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (10)

Sell (1)

Natural Gas Futures

4.077

+0.041 (+1.02%)

Summary

↑ Sell

Moving Avg:

Buy (2)

Sell (10)

Indicators:

Buy (7)

Sell (2)

US Coffee C Futures

238.13

+0.23 (+0.10%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

Euro Stoxx 50

4,164.60

+86.34 (+2.12%)

Summary

Neutral

Moving Avg:

Buy (7)

Sell (5)

Indicators:

Buy (3)

Sell (3)

S&P 500

4,349.93

-6.52 (-0.15%)

Summary

↑ Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (11)

Sell (0)

DAX

15,459.39

+335.52 (+2.22%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (5)

Sell (1)

FTSE 100

7,469.78

+98.32 (+1.33%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (2)

Sell (6)

Hang Seng

23,746.00

-543.90 (-2.24%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

US Small Cap 2000

1,971.72

-32.32 (-1.61%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (5)

Sell (4)

IBEX 35

8,620.20

+140.70 (+1.66%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (9)

BASF SE NA O.N.

67.310

+1.980 (+3.03%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (6)

Sell (0)

Bayer AG NA

51.55

+0.73 (+1.44%)

Summary

↑ Buy

Moving Avg:

Buy (9)

Sell (3)

Indicators:

Buy (8)

Sell (1)

Allianz SE VNA O.N.

224.80

+4.75 (+2.16%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (1)

Sell (6)

Adidas AG

243.20

+5.45 (+2.29%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (2)

Sell (4)

Deutsche Lufthansa AG

7.067

+0.390 (+5.84%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (2)

Sell (6)

Siemens AG Class N

141.24

+2.72 (+1.96%)

Summary

Neutral

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (3)

Sell (1)

Deutsche Bank AG

11.420

+0.346 (+3.12%)

Summary

↑ Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (1)

Sell (6)

 EUR/USD1.1209↑ Sell
 GBP/USD1.3420↑ Sell
 USD/JPY114.78↑ Buy
 AUD/USD0.7071↑ Sell
 USD/CAD1.2719↑ Buy
 EUR/JPY128.65Neutral
 EUR/CHF1.0378Neutral
 Gold1,809.95↑ Sell
 Silver23.163↑ Sell
 Copper4.4340Neutral
 Crude Oil WTI87.04↑ Buy
 Brent Oil88.46↑ Buy
 Natural Gas4.077↑ Sell
 US Coffee C238.13↑ Sell
 Euro Stoxx 504,164.60Neutral
 S&P 5004,349.93↑ Buy
 DAX15,459.39↑ Buy
 FTSE 1007,469.78↑ Sell
 Hang Seng23,746.00↑ Buy
 Small Cap 20001,971.72Neutral
 IBEX 358,620.20↑ Sell
 BASF67.310↑ Buy
 Bayer51.55↑ Buy
 Allianz224.80↑ Sell
 Adidas243.20↑ Sell
 Lufthansa7.067↑ Sell
 Siemens AG141.24Neutral
 Deutsche Bank AG11.420↑ Sell
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank6,195/ 6,235
(5/ -5) # 1,266
SJC HCM6,185/ 6,245
(5/ 0) # 1,276
SJC Hanoi6,185/ 6,247
(5/ 0) # 1,278
SJC Danang6,185/ 6,247
(5/ 0) # 1,278
SJC Nhatrang6,185/ 6,247
(5/ 0) # 1,278
SJC Cantho6,185/ 6,247
(5/ 0) # 1,278
Cập nhật 27-01-2022 02:47:38
Xem lịch sử giá vàng SJC: nhấn đây!
ↀ Giá vàng thế giới
$1,811.75-10.41-0.57%
Live 24 hour Gold Chart
ʘ Giá bán lẻ xăng dầu
Sản phẩmVùng 1Vùng 2
RON 95-IV2486025350
RON 95-II,III
E5 RON 92-II2359024060
DO 0.05S1890019270
DO 0,001S-V1925019630
Dầu hỏa1779018140
ↂ Giá dầu thô thế giới
WTI$86.59+0.290.33%
Brent$88.37+0.160.18%
$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD22.470,0022.780,00
EUR24.775,4326.164,36
GBP29.663,4530.930,27
JPY191,46202,68
KRW16,2819,84
Cập nhật lúc 14:43:05 27/01/2022
Xem bảng tỷ giá hối đoái
binance main right Fxpro Main Right aetos main right adver main right