Economic crisis in Turkey deepens – New dollar/TL forecast comes from prominent bank
With consecutive hikes after the Turkish economy reached a dead end, the dollar / TL has broken record after record due to fears that inflation will increase further. After these developments, Bank of America Securities (BofA) made a new dollar/TL forecast.
With the increase in taxes and excise duty, the dollar / TL broke an all-time record due to the concern that inflation would rise further while the hikes came one after the other.
On the other hand, the investor’s focus is on the rising inflation concern in domestic markets and the interest rate decision that the Central Bank of the Republic of Turkey (CBRT) will announce on July 20, 2023 at 14.00.
SALE OF TURKEY’S ASSETS (MORE) ON AGENDA
In addition, President Recep Tayyip Erdogan’s visit to the Gulf countries, which started yesterday, is also among the agenda items being followed. The sale of country’s assets (as voiced by the President) during Erdogan’s visit, is the main item on the agenda for the Turkish economy, which is at an impasse at the moment.
INFLATION CONCERN IS THE PREVAILING VIEW
Along with these developments, demand for the dollar has decreased with the strengthening of forecasts that the US Central Bank (Fed) may increase its policy rate by 25 basis points this month and put an end to its “hawkish” steps. However, rising inflation concerns in domestic markets (Turkey), foreign debt and budget deficit caused the dollar/TL to gain upward movement.
“INFLATION WILL PEAK”
In the report shared by BofA economists regarding Turkey, the inflation forecast for the end of 2023 was increased from 44 percent to 58 percent due to the depreciation of the lira, a 34 percent increase in the minimum wage, and an increase in excise duty and VAT rates. Inflation was predicted to reach a peak level of 65 percent next May.
CENTRAL BANK INTEREST RATE EXPECTATION
Economists, who also shared the expectations of the Central Bank, indicated that there could be a rate hike of up to 500 basis points this week, adding: “There could be an increase of between 300 and 500 basis points Dec. We think that the CBRT will make the transition gradually in order not to cause unexpected damage to the economy. It is unclear how long the rate hikes will last. We expect the policy interest rate to be at the level of 35 percent at the end of the year.”
DOLLAR/TL FORECAST
While the Central Bank is expected to announce its interest rate decision on Thursday, the dollar exchange rate renewed its record by seeing the level of 27.23 TL on the new day.
BofA economists, on the other hand, announced that the year-end dollar / TL forecast is 31 TL.
CENTRAL BANK DOLLAR/TL FORECAST
On the other hand, the Central Bank’s year-end dollar /TL expectation increased to TL 28.46 during the survey period announced last week, from TL 26.18 during the previous survey period.
