Monthly inflation reached 5.46% while annual inflation rose from 54.44% to 61.14% in March, compared to the previous month, according to the Turkish Statistical Institute (TurkStat). The economic world estimated the monthly inflation would rise by 5.6% and the annual inflation would reach 61.5%. Although the March data remained below expectations, the annual inflation has seen its highest level since March 2002, when it rose to 65.1%. Thus, annual consumer inflation hit a 20-year high after energy commodity prices rose sharply due to the Russia-Ukraine war. Hikes in food prices couldn’t be prevented despite a Value-Added Tax (VAT) reduction.
The domestic producer price index (D-PPI), or producer inflation, continues to produce three-digit figures. TurkStat said the D-PPI rose by 9.19% in March, while the annual producer inflation increased from 105.01% to 114.97% last month as compared to February. Apart from the deteriorating inflation figures, Turkey faced higher D-PPI numbers with the adverse impact of the war. Although the government reduced the VAT on many products April has started with the price increase in natural gas, electricity, and sugar. That’s why analysts estimate for both consumer and producer inflation to continue to rise in April and the annual inflation to exceed 70% in May. Moreover, the year-end inflation forecast has been raised to 54% for 2022.
Treasury and Finance Minister Nureddin Nebati stated following the Consultation and Evaluation meeting held with the Bursa Chamber of Commerce and Industry that the government is determined to reduce inflation permanently and maintain price stability. Nebati also said they expect a permanent decrease in inflation by the end of the year.
International financial institutions also started to revise their projections after annual inflation exceeded 60% in the country. The U.S.-based investment bank Goldman Sachs stated that annual inflation will remain above 65% for the majority of the year and a peak will be seen at 67.0% in May and June. The institution previously estimated the peak to be just above 60% and the year-end inflation to fall to 45%.
Another American investment bank, JPMorgan, said that annual inflation will hover around 65-70% until the end of the year. The institution raised its year-end inflation forecast to 40.2% last month.
In the meantime, Borsa Istanbul’s BIST 100 Index rose by 2.65% to 2,311.40 points on Monday, from Friday’s close of 2,230.35 points, hitting an all-time high. Turkey’s benchmark stock index reached a daily trading volume of TRY 50.3bn yesterday. Global equity markets started the week on a fluctuating course with the adverse impact of the ongoing war and increasing concerns over a recession. Analysts also said the upward pressures stemming from the energy price increase is pushing hawkish monetary policies. They also stated that 2,150 points will be the support level and 2,400 points will be the resistance level, in technical terms, in the BIST 100 Index.
DAILY AGENDA
The Central Bank will release the Real Effective Exchange Rate for March (2.30 pm).
President Recep Tayyip Erdogan will chair the AK Party’s Central Executive Committee (MKYK) meeting (3.00 pm).
The Parliament will discuss a legislative proposal on amendment of some laws (3.00 pm).
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>> Inflation soars 6.3% in Istanbul
The Istanbul Wage Earners Cost of Living Index (WECLI), which indicates the movement of retail prices in Istanbul, rose by 6.29% in March compared to the previous month, according to the Istanbul Chamber of Commerce (ITO). The Wholesale Price Index, which reflects wholesale prices in the city, increased by 7.65% in the same period. Istanbul inflation is considered key data for overall inflation in Turkey. That figure reached 61.1% annually last month.
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