Treasury and Finance Minister Nureddin Nebati has reiterated the view that Turkey’s annual inflation will fall to single digits by the time presidential and parliamentary elections set for mid-2023 are held.

Nebati’s remarks on Saturday came two days after he said inflation would peak in January, months earlier than predicted, and start to fall from May, before reaching single digits by June 2023.

The consumer price index (CPI) surged to a 19-year high of 36.1% in December, the highest annual reading since September 2002, driven by last year’s slide in the Turkish lira and rising global commodity prices.

High inflation only problem

Speaking to heads of nongovernmental organizations (NGOs) in Istanbul, Nebati said Turkey’s only problem now was high inflation, and the volatility in the lira's exchange rate had settled.

"With fiscal policies and the steps that we will take, we will enter the elections ... next year with single-digit inflation," Nebati said.

"We will all experience, see the change after the first quarter (of 2022)," he said about inflation.

Government officials have promised to bring inflation down quickly. Yet, some analysts see it remaining high through the year.

A central bank survey of market participants on Friday showed inflation would still be around 30% at the end of this year.

The survey showed annual consumer price inflation was expected to be 29.75% at the end of 2022.

President Recep Tayyip Erdoğan last week pledged to tame the surging consumer prices, stressing that inflation figures were not in line with economic realities in Turkey and he hoped to see the benefits of Ankara’s economic policy in the summer.

Erdoğan stressed that the government’s measures would soon soften the burden of "unjust" price hikes.

De-dollarization trend to accelerate

The lira depreciation and soaring global commodity prices have been the main drivers of the rise in consumer prices.

The currency weakened 44% last year, with volatility calmed last month after the government unveiled a scheme to safeguard lira deposits against currency volatility.

The lira had fallen to a record low of 18.4 against the United States dollar in December before rebounding sharply the week before last after Erdoğan announced the scheme to encourage savers to convert deposits from foreign exchange, compensating depositors for any losses due to lira depreciation.

Nebati said on Saturday the de-dollarization trend and conversion of foreign exchange holdings to the lira will accelerate in the coming weeks.

"The decline in forex deposit accounts has begun. We will see the declining trend in the forex deposit accounts continuing downward quickly," he said and added that the central bank’s reserves will rise as well.

Nebati said that as of Friday night, more than TL 131 billion ($9.69 billion) had been deposited in the lira accounts under the government scheme.

On Thursday he had said some 15% of the deposits came from foreign currency accounts, with some 300,000 people participating in the scheme.

FX scheme spoils ‘attacks’

Speaking in the western province of Aydın, Erdoğan on Saturday said the lira protection scheme had spoiled foreign economic "attacks."

"In the last few years, they specifically targeted our economy. They made countless efforts to create an economic crisis followed by political and social chaos," he said.

Erdoğan said Turkey was aiming for $35 billion in tourism revenues this year, and $250 billion in exports.

The volatility in the lira came after the Central Bank of the Republic of Turkey (CBRT) slashed its policy rate by 500 basis points to 14% from 19% since September.

The bank is widely expected to hold its one-week repo rate steady at its first Monetary Policy Committee (MPC) meeting of 2022 this week.

The bank said last month it would monitor the impact of recent easing in the first quarter of 2022, which economists took as a signal it would hold in January.

All but one of 16 economists in a Reuters poll predicted the CBRT would halt easing on Jan. 20. One economist predicted a 50 basis-point cut to 13.5%.

On the direction of near-term central bank policy, Nebati on Thursday only said that "we need to wait and see what happens in January, February and March."