Turkey’s Q2 economic growth will be ‘pretty strong:’ CBRT governor
People walk in the Eminönü neighborhood, in Istanbul, Turkey, May 28, 2021. (AP Photo)

Turkey’s Q2 economic growth will be ‘pretty strong:’ CBRT governor

Turkey registered a “pretty strong” growth in the second quarter due to the so-called base effect and employment levels will continue to grow from levels impacted by COVID-19 restrictions, Central Bank of the Republic of Turkey (CBRT) Governor Şahap Kavcıoğlu said on Thursday.

Presenting the bank’s quarterly inflation report, Kavcıoğlu also said the current account had started to improve as gold imports fell below historical levels. Loan growth showed a moderate trend and the governor predicted Turkey’s banking watchdog would limit consumer loan growth.

The bank went on to increase its year-end inflation forecast to 14.1%, up from 12.2% in the previous report, announced in April. Kavcıoğlu said they also upgraded their view of year-end food inflation to 15% from 13%.

Turkey’s annual inflation rose to 17.53% in June, a two-year high. In May, the consumer price index unexpectedly dropped to 16.59% after a three-week lockdown in May led businesses to forego price hikes.

The inflation rose to the top range of expectations in June and structural issues behind inflation need to be solved and steps taken to increase competition, Kavcıoğlu noted.

“The increase in inflation is temporary,” the governor stressed, noting that a slowdown is expected in the consumer prices by year-end.

He also noted that the 2022 inflation forecast has been upgraded to 7.8% from 7.5%, while 2023 forecast has been maintained at 5%.

Kavcıoğlu said the central bank would decisively maintain a tight stance but monetary policy alone was not enough to fight inflation.

“The benchmark policy rate will continue to be set above inflation,” he noted, stressing that consumer prices are forecast to fall as of the end of third quarter and in the last quarter.