ECONOMY

Turkey’s August inflation at 2.2 pct, slightly above estimates

ANKARA – Turkey yesterday reported August consumer price inflation (CPI) of 2.2 percent monthly, slightly above market expectations, but analysts welcomed generally positive data, saying targets backed by the International Monetary Fund (IMF) were still within reach. Annual consumer price inflation in the crisis-hit NATO ally now stands at a yearly 40.2 percent, down from 41.3 percent in July and edging nearer to a 35-percent year-end target under its $16-billion IMF loan deal. «CPI was a little higher than we expected and that might indicate some increase in demand. The really important period will be September and October because they will show seasonal effects and delayed price increases,» said Ahmet Akarli of Finans Invest in Istanbul. The State Statistics Institute said the monthly rise in CPI in August was 2.2 percent, compared with an average forecast of 2.05 percent in a Reuters poll. The equivalent rise in July was 1.4 percent. The monthly wholesale price (WPI) rise was 2.1 percent, compared with a forecast for August of 2.22 percent and 2.7 percent in July. Annual WPI in August was 43.9 percent, compared with 45.9 percent in July. A financial crisis in February 2001 forced the government to float the lira currency, unleashing sky-high inflation and wrecking a previous IMF anti-inflation plan. Turkey now has a revised $16-billion IMF deal and the central bank has been steadily guiding key lending rates down as inflation falls but analysts say the uncertainty of looming November elections mean the bank is unlikely to take the August data as a spur for another cut. The bank last cut its rates on August 5. Analysts also welcomed lower-than-expected core inflation they said had been pegged down by a stronger lira and still depressed demand amid the country’s worst economic recession since 1945. Core inflation, defined in Turkey as the rise in private sector manufacturing prices, showed a monthly rise of 2.3 percent in August, compared with 4.1 percent in July. The poll showed an average forecast of 2.97 percent for core inflation. Higher monthly increases are expected in September, when there are many seasonal price increases, but that should not compromise key IMF targets, analysts say. Turkey and the IMF have agreed on a year-end annual CPI target of 35 percent. Their lending pact also sees growth of 3 percent by the end of the year after last year’s contraction of 9.4 percent. «On a monthly basis, inflation could reach 4 percent but even then you still get to 35 percent at the end of the year (for annual CPI),» said Debbie Orgill at ABN Amro in London. Turkey is headed for snap polls on November 3 after government infighting between the three coalition parties nearly wrecked the government in July. Financial markets had sagged with fears that political upheaval could compromise the IMF-backed recovery plan, but investors now see the election as the way out of months of uncertainty. With oil production soaring at home, one thing the Russians do not need urgently is to acquire any big oil fields outside their home turf. Richer Western firms are prepared to pay hefty premiums for valuable production assets.