On Wednesday, data showed that annual inflation in Turkey is expected to decline sharply in December to 66.8% because of a favorable base effect.
However, it is expected to record a drop of only 42.3% by the end of next year and monthly price increases are expected to remain elevated.
The forecast for the end of 2023 is almost twice of that of the government and it means that Turks would have to deal with the cost of living problems in the next year as well.
Meanwhile, they will be preparing for tight parliamentary and presidential elections in 2023 as well. In October, the inflation in Turkey reached a 24-year high of 85.5%.
This was after it had risen for 17 months consecutively because of the unorthodox monetary policy of low-interest rates adopted by Turkish President Tayyip Erdogan, which had led to a currency crisis last year.
In November, there was a slight drop in inflation and the drop is expected to gain more prominence in December as well as the first quarter of 2023.
Most economists believe that annual inflation in December would reach 66.8%. The government had forecast it at 65% and most of the others also predicted it to be between 64.60% and 69.1%.
There has been a sharp rise in prices month-to-month, with estimates at 2.7%. But, the inflation numbers for December may face uncertainty because of the direction of food and automotive prices.
This is due to the fact that some amendments were made in late November to the vehicle special-consumption tax brackets.
This month, there was a drop in fuel prices as oil prices also dropped, but prices of natural gas and electricity remained stable.
Even though there has been a rise in prices, the Turkish central bank has cut down its policy rate by 500 basis points to 9% since the month of August because of an economic slowdown.
This reduction in interest rate was part of the president’s economic program that focuses on prioritizing employment, investments, production, and exports.
Last year, there was a 44% drop in the value of the Lira against the US dollar, most of which happened in December as the rate cuts had sparked a currency crisis.
This year, the Lira shed another 30%, which saw it drop to historic lows, but the currency has held steady in the last few months.
According to the government, the economic program would help the country in turning the deficits in its current account into a surplus, which can contribute to a decline in inflation.
But, data shows that economists believe inflation would only drop to 42.3% by the end of next year, with most forecasts putting it between 33% and 48%.
However, the government believes that inflation would drop to 24.9% by the end of 2023 and it does not believe there will be a current account surplus in the next three years.
December inflation data will be announced by the Turkish Statistical Institute on January 3rd.