Türkiye's vice president reaffirmed expectations for a significant deceleration in inflation during the summer months, reiterating it as an utmost priority of the government that requires time to achieve.
"We will witness a significant decline in inflation, especially during the summer months, June, July, August, when considering seasonal effects, the impact of our policies and base effects," Cevdet Yılmaz told the private broadcaster A Haber late Friday.
"When you sum up these three months, we expect a decrease of around 20%. Therefore, until May, we will see an effect coming from the annual base rather than the developments every month or from the past years," Yılmaz said.
Data earlier this month showed annualized inflation climbed to 68.5% in March.
It is expected to peak at as high as 75% in the coming months before entering what officials expect to be a steep downward trend in the second half of 2024.
"We will see high annual figures, but with the announcement of June inflation, a downward trend will begin. This will accelerate in July and August, and toward the end of the year, we will see these effects more prominently," Yılmaz said.
Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan last week said Türkiye is on track to reach the 36% target by the end of the year. Yet, he said markets believed the target would be achieved with a three-month delay.
Yılmaz highlighted that their priority in programs is to reduce inflation and emphasized that results in combating inflation are achieved over a certain period.
In 2025, the vice president said the government's economic program, estimate, expectation and policy aim for inflation below 20%.
"By 2026, our country will return to single-digit figures. We have already made the program and plan for this and are implementing it step by step," Yılmaz said.
Türkiye walked away from years of easing policy after last year's presidential and parliamentary elections. It delivered aggressive tightening aimed at cooling demand to curb inflation, rebuilding reserves and flipping chronic current account deficits to surpluses.
The central bank has raised its key one-week repo rate by 4,150 basis points from 8.5% to 50% since last June, mainly seeking to ease demand, the main driver of inflation.
After last month's 500 basis point hike that stunned the markets, the bank cited a deteriorating outlook and pledged to tighten even further if it expects the price situation to worsen significantly.
Yılmaz said the government initiated extensive work to increase savings in the public sector, aiming to eliminate unnecessary expenditures, prioritize spending, and make it more efficient.
He said the Treasury and Finance Ministry and the Presidency's Strategy and Budget Directorate are conducting studies on this issue.
Last week, President Recep Tayyip Erdoğan last week said Türkiye would take steps to strengthen its medium-term program (MTP), and the three main priorities are to increase public savings, prioritize investments and accelerate structural reforms.
Erdoğan said his economic team had prepared for such steps and "Hopefully, we will share them with the public very soon."
Yılmaz also mentioned that the central bank had recently accumulated reserves, emphasizing that markets have started to function much more healthily.
"In the upcoming period, we will continue to follow our policies decisively within political trust and stability. We will further reduce the current account deficit. There has also been a slight decline in our imports. Our trade balance is improving. We did very well in tourism last year. When we look at Turkey from a macroeconomic perspective, it continues p"positively," the official said.
Official data last week showed Türkiye's current account deficit stood at around $3.26 billion in February, less than a market forecast for a deficit of $3.7 billion.
The annualized current account gap has dropped to around $32 billion, compared to around $60 billion last May, said Yılmaz.
"What does this mean? It means your need for foreign currency is decreasing. Therefore, Türkiye has a much lower need for foreign currency," he noted.
With the new macro policies, he said Türkiye is in a period where access to foreign currency sources and foreign currency-based financing has become much" easier.
"The need has decreased and the access opportunity has "increased," he noted.
Overall, there may be some daily, weekly and sometimes monthly effects, which may have some negative reflections, said Yılmaz.
"But these are temporary effects. What needs to be looked at is the direction. It is your program and where the program is leading you. In the postelection period, we will continue "on our path."
