Consumer prices increased by 0.56 percent in February, which together with consumer inflation in the previous 11 months resulted in an annualized consumer price index (CPI) increase of 10.43 percent, the Turkish Statistics Institute (TürkStat) said on Monday.
The latest figures represent minor progress in Turkey’s fight against inflation since the annualized rise in the CPI was at a three-year peak of 10.61 percent in January. They also were lower than expectations, but the news failed to lift Turkish stocks at the beginning of the week because they were pressured downwards by the uncertainty over Greece’s second bailout package and a lowered economic growth target in China. The benchmark İMKB-100 index of the İstanbul Stock Exchange (İMKB) was down slightly more than 1 percent at 60,273 points when the first trading session ended.
Inflation is a closely watched statistic in a country whose economy has steadily grown over 5 percent on average each year since 2003 and increased its pace of growth to over 8 percent in the past two years. The present inflation in consumer prices is partly a result of Turkish gross domestic product’s (GDP) expansion performance, and observers have already started warning against a possible hard landing following a long period of economic boom.
Government and Central Bank of Turkey officials, backed by some experts, maintain that a hard landing is a less likely scenario since the relevant measures put in place lately have started to prove effective in curbing both inflation and the current account deficit (CAD). A soft landing, a more sustainable rate of economic growth at 5 percent per year with milder inflation and a much lower CAD, is for them what is going to happen in the next three years covered by the government’s Medium-term Economic Program (OVP). The central bank expects consumer inflation to be around 5 percent by the end of this year.
The forecasts, which are related to economic growth as well as CAD and inflation in that program, however, may have to be revised if oil prices continue surging because of tensions between Iran and the West surrounding the Middle Eastern country’s controversial nuclear program. Although the major oil producer insists that its nuclear ambitions are limited to peaceful purposes, the West -- led by the United States -- says it suspects the country’s intentions. The US and Israel do not rule out a military operation against Iran, which has already become subject to tough UN and Western economic sanctions. The price of crude oil recently spiked to over $105 from below $100 on the growing tension in the region.
On Monday TürkStat also said producer prices, unlike consumer prices, dropped in February. According to the official statistics bureau, the producer price index (PPI) decreased by nearly 0.1 percent in the second month of the year. The annualized increase in the PPI was recorded at 9.15 percent the same month. It was 11.13 percent in January. That major slide in PPI is likely to push the CPI down as well since the decline in producer costs are possibly to be reflected in prices of consumer goods.