According to a report published by HSBC, the latest messages from the economic management regarding the Turkish economy cause revisions in the CBRT monetary policy expectations of foreign investors. According to the report, HSBC increased its year-end policy rate expectation from 30 percent to 32.5 percent.
The report states that Turkey’s near-term outlook has improved significantly in the last four months. got better It is stated. While the new team of the Central Bank tightens monetary and macroprudential policies, it is emphasized that some previously implemented regulatory measures have begun to be relaxed. It is also noted that in July the government increased tax rates to finance earthquake reconstruction expenses. As a result of these measures, it is stated that the budget had a surplus in July and August and the 12-month cumulative deficit decreased below 3 percent of GDP.
The report also emphasizes that the new economic staff, led by CBRT President Erkan and Minister of Treasury and Finance Mehmet Şimşek, will proceed in policy making in a more rational, transparent and rule-based manner. However, it is stated that the imbalances in Turkey (inflation, foreign exchange leverage, foreign exchange supply, central bank reserves) are still large and the solution to these problems will require a difficult adaptation process.
While HSBC maintained Turkey’s growth expectations at 4.4 percent for 2023, it reduced its 2024 GDP growth forecast from 4.1 percent to 3.0 percent. It also expects monetary policy to tighten further and predicts that the policy rate will be 32.5 percent at the end of this year. In contrast, it foresees a more limited budget deficit and a larger current account deficit in 2023 and 2024. However, it is thought that official spending estimates may be exceeded in 2024 after the local elections.