By Nevzat Devranoglu

GIRESUN, Turkey (Reuters)

Turkish Finance Minister Mehmet Simsek stated that Turkey will not change its economic course in response to recent market and trade developments. He expects inflation to likely align with the central bank’s year-end forecast range.

Inflation Update

Annual consumer price inflation in Turkey decreased to 38.1% in March, continuing from a peak of approximately 75% last May. The central bank’s year-end inflation midpoint estimate is currently set at 24%, within a forecast range of 19% to 29%.

Market Challenges

Despite the optimistic inflation outlook, lira-denominated investments have suffered due to the recent arrest of Istanbul Mayor Ekrem Imamoglu, seen as a rival to President Tayyip Erdogan. Additionally, tariffs imposed by U.S. President Donald Trump are further complicating Turkey’s economic situation.

Simsek commented, “It is too early to analyse the permanent effects of recent developments in domestic financial markets and the global economy on our programme targets.” He emphasized that commitment to their economic programme is crucial, with price stability as the primary goal.

Economic Projections

Simsek indicated that limited lira depreciation is expected, anticipating weak exchange rate pass-through due to weak demand conditions. He noted a high probability of inflation aligning within the central bank’s target range.

He also mentioned that the net current account balance could improve, despite trade wars posing a risk to global growth. Additionally, he expressed confidence that the current account deficit could remain below previous forecasts of 2% of GDP in the medium term.

Budget Discipline

Regarding the budget, Simsek reiterated that spending discipline would continue to support the disinflation process with a negative fiscal effect. He asserted that while strict financial conditions might negatively impact revenue, they will not pose significant concerns for the programme overall.