Turkey Inflation Set to Breach 52% Even Before Oil Jump Kicks In

Author of the article:

Bloomberg News

Bloomberg News

Baris Balci

(Bloomberg) — Turkish inflation likely jumped to a fresh two-decade high in February, with the oil rally propelled by Russia’s invasion of Ukraine set to further fan price gains.

Data due Thursday will show consumer price inflation climbed for a ninth month to an annual 52.5%, according to the median estimate in a Bloomberg survey of 22 economists. That compares to 48.7% in January. 

The central bank already expects year-end inflation at 23.2%, more than four times its target, after rate cuts in 2021 weakened the lira. But that estimate was based on oil at $80.4 a barrel. With crude prices at an 8-year-high having topped $110, Turkey’s energy import bill will rise.


That’s bad news for President Recep Tayyip Erdogan’s re-election bid next year as a cost-of-living crisis drains some support. Erdogan said Tuesday that inflation “will be under control” by the summer.

With the president vowing to use the cheaper lira to turn Turkey into a manufacturing power, interest-rate hikes aren’t on the agenda to curb price gains. The Finance Ministry has vowed to “ensure continuation of food and commodity supply.” 

Key Insights

The central bank cut rates by a cumulative 500 basis points in four meetings from September. The reductions pushed the official rate to almost negative 35% when adjusted for annual inflation, sending the currency into a tailspin.

Following a brief calm as a government savings program stabilized the lira, it’s again under pressure with investors avoiding riskier assets amid a slew of sanctions imposed on Russia over its war on Ukraine. Moscow supplies more than half of Turkey’s gas while Russian tourists have been a major source of income.


The lira has sunk 5.3% against dollar this year, the most after the Russian ruble and Polish zloty among major emerging markets.

What Bloomberg Economics Says…

We expect Turkey’s consumer price inflation to reach 53% in February, more than 10 times the central bank’s target. Higher food, energy, rent and medicine costs are likely to account for the acceleration in February. The government’s decision to cut taxes on staple foods will only offset part of the increase.

The war between Russia and Ukraine could push living costs even higher beyond February, causing year-end inflation to overshoot the central bank’s projection.

–Selva Bahar Baziki, Turkey and Sweden Economist for Bloomberg Economics.

What Economists Say

The war in Ukraine is adding pressure on Turkey’s external financing costs and currency, said Gizem Oztok Altinsac, chief economist of Turkish Industry & Business Association. “We had predicted before the Ukraine crisis that Turkish inflation would touch 60% in May or June. Now, upside risks have emerged on our forecast,” she said. 

Coming Up

Central government budget data will be released on March 15. The central bank’s next rate-setting meeting is scheduled for March 17. 

©2022 Bloomberg L.P.


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