The monthly survey conducted by Central Bank of Turkey (CBRT) among financial professionals and research staff in non-financial companies is currently the only comprehensive expectations survey in Turkey. In terms of its scope and methodology it falls somewhere between the German Ifo and ZEW, but covers current account and dollar/TL forecasts in addition.
The October survey revealed that inflation expectations have been unmoored across the horizon stretching from 1 to 10 years, which constitutes a major problem for the monetary authority, because it will require very tight monetary policy as well as belt tightening in the budget to bring down. Despite persist new news flow of Turkey’s natural gas discovery, participants still expect fairly large current account deficits for 2020-2021.
These are headlines from October Expectations Survey, collated from Turkish brokerage house research reports:
- Hike on the policy rate expectations and deterioration on the inflation expectations continued in October, according to the CBRT’s Survey of Expectations.
- According to the CBRT’s Survey of Expectations for October 2020, policy rate (10.25%) would be increased by 125-150bps in this month and there would be a 75bps of additional hike in next 3 months. Also, ongoing increases in the expectation for the weighted average funding cost indicate that tight liquidity management shall be The next MPC meeting would be held on October 22.
- Year-end CPI forecast climbed to 11.76%, up 30bps MoM, which is a fairly drastic upwards shift. Both short term (12-month:+38bps, 24-month ahead: +19bps) and long term (5-year:+27bps and 10-year ahead: +19bps) inflation expectations deteriorated in October.
- Expectations of USDTRY exchange rate for the year-end increased by 3.9% to TL7.8979 while 12-month ahead increased by 4.7% to TL 8.3087.
- Expectations for the 2020 GDP growth improved by 0.7pps to -0.8% while the next year’s expected growth rate decreased by 0.1pps to 4.1%.
- Expectations of current account deficit for 2020 increased from USD22.8bn to USD28.2bn, while the consensus forecast for 2021 rose from USD20.2bn to USD22bn for 2021.
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