ECONOMY

Turk inflation down, reserves up

ISTANBUL (Reuters) – End-2003 Turkish consumer inflation (CPI) is seen dropping to 19.8 percent, the first time expectations have fallen below the government’s IMF-backed target of 20 percent, a central bank survey showed yesterday. Official data have shown inflation edging closer to the target in recent months. Annual CPI was 23 percent in September. A strengthening lira has helped lower chronically high inflation. The currency has traded at around 17-month highs in recent weeks after it hit record lows of about 1.75 million to the dollar in March ahead of the war in neighboring Iraq. The survey showed expectations that the lira would finish 2003 at 1.5 million to the dollar. Surveys earlier this year saw the currency ending at above 2 million to the dollar. The lira closed yesterday on the interbank market at 1,383,000. Signs of economic recovery from a devastating 2001 recession have boosted investor hopes that Turkey can meet targets agreed with the IMF under a $16 billion loan accord. The bi-weekly survey, used by the central bank to help set monetary policy, also showed expectations that gross national product (GNP) this year would grow by 5.2 percent, slightly lower than previous expectations of 5.3 percent. Turkey is targeting 5 percent GNP growth under its IMF pact. Yields on the benchmark three-month treasury debt were seen at 27 percent, stronger than a previous forecast of 28.8 percent. Turkey last auctioned the papers at a rate of 30.75 percent on September 15. Separately, the central bank said its foreign exchange reserves climbed $281 million to a record $34.151 billion in the week ending on October 3. The bank’s reserves have jumped in recent weeks after repeated intervention in the foreign exchange market and daily auctions to buy dollars as the lira reaches months-long highs, threatening exports. Turkey’s total gross reserves were $43.97 billion in the week ending on September 19, the latest available data. Of that, $11.223 billion were with private institutions, including commercial banks, while the rest was with the central bank. Gold reserves were unchanged at $1.279 billion, the bank said in its weekly bulletin.