CBRT Market Participants Survey: Year-end inflation expectation drops to 67.7%

In the CBRT September Market Participants Survey, the current year-end inflation expectation was 67.73%. When we look at the short-term inflation expectations; September inflation is expected to be 2.98%, October inflation to 2.94% and November inflation to 2.70%. If inflation increases in line with the expectations in these months, annual inflation in September, October and November will be 83.28%, 84.26% and 82.81%, respectively.

The lower-than-expected inflation in July and August, the decline in energy and commodity prices, and the relatively flat course in exchange rates seem to have reflected somewhat optimistically on the survey expectations. On the other hand, at the beginning of September, we saw a very serious increase in electricity and natural gas prices. Electricity due to high natural gas prices; At the same time, food prices may remain high due to effects such as fertilizers and imported inputs. Regarding the expectations for inflation in 12 months and beyond, it is necessary to consider the possibility of a possible change in policies. However, it is difficult to predict and the margin of error is quite high. We foresee higher year-end and 12-month inflation rates.

The CBRT revised its year-end forecast from 42.8% to 60.4% in its latest Inflation Report published on July 28. The Central Bank's perspective is that since 2Q22, increases in global commodity prices, primarily energy and food, supply constraints caused by the ongoing disruptions in the global supply chain, and exchange rate developments continue to put pressure on consumer prices.

According to the average inflation forecasts for the next 12 and 24 months, inflation is expected to be 36.74% and 20.63%, respectively. Thus, the average of inflation expectations for the next 12 and 24 months became 28.69%. Inflation expectation after 5 years decreased from 10.72% to 9.58%.

Interest rate expectations in the Repo and Reverse Repo Market became 12.83% for the end of the month after the Central Bank's rate cut. The market predicts the one-week repo rate, which is the policy rate of the Central Bank, as 13, 12.59, 15.42 and 13.91% in the current month and 3, 12, and 24 month future expectations, respectively.

The CBRT is expected to keep the policy rate unchanged this month and until the end of the year, and to reduce the interest rates again after the 3-month period. Despite the challenging conditions, the Central Bank does not signal a return to its orthodox monetary policy and rate hikes. We do not expect a change in interest rates at the September 22 meeting.

We see an understandable rise in growth expectations for this year. The 2022 GDP expectation has been increased to 4.8%. The forecast for 2023 was 4.5% growth in the September survey period. After the strong growth figures in the first two quarters of the year, an annual economic growth of 3.8% was guaranteed, even if no growth was recorded in the rest of the year. As growth-oriented policies are implemented and this perspective is maintained in the near term, we can see trends towards achieving the ratios set forth in the MTP. With the strong growth achieved at the beginning of the year, GDP could grow by 5% this year.

Current account deficit expectations for 2022 from $39.31 billion to $45.89 billion; For 2023, it increased from $25.45 billion to $27.74 billion. Current account deficit expectations of market participants continue to increase. Our year-end expectation in the current account balance is 50 billion dollars. Despite the positive effect on services revenues on the current account deficit side, the growth in the foreign trade deficit is the main factor in our expectation. Commodity prices are still above the average of the previous years and the recent price decreases do not seem sufficient to correct our current account deficit profile. On the other hand, the global appreciation of the dollar also causes the depreciation of the TRY and imported goods to be more expensive. In this respect, a double-sided effect is felt from commodity prices and exchange rates. Although the slowdown in domestic demand slows down consumption-based imports, we expect the price effect to increase the bill. On the export side, the global economic slowdown, recession effects in Europe and the decline in EURUSD parity will be suppressive.

Exchange rate expectations were 19.51 for the end of 2022. We see that the exchange rate expectations for the next 12 months are 22.07. We observe that the relatively stable course of the exchange rates and the provision of capital inflows have slightly improved the exchange rate expectations, although this has been caused by net errors and omissions in the last period.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı