Hyperinflation warning from former MB Deputy Chairman Turhan! We have by no means seen this in our historical past, however…

Within the final inflation report of the 12 months, the Central Financial institution (MB) raised its year-end inflation forecast to 65.2 p.c. Former MB Deputy Chairman Turhan stated, “It’s true that end-year inflation will fall to round 70 p.c in 2022. I believe we will see double-digit month-to-month inflation in March-April. If credit score enlargement is as robust as I believe, then Turkey could must expertise a small instance of hyperinflation that it has by no means seen in its historical past. ” stated.

Former Central Financial institution (MB) Vice President İbrahim Turhan, in his assertion on the Central Financial institution’s year-end inflation forecast, stated, “It’s true that year-end inflation will decline to round 70 p.c in 2022. I believe we will see double-digit month-to-month inflation in March-April. Credit score enlargement may be very robust as I believe. If it does, then Turkey could must expertise a small pattern of hyperinflation that it has by no means seen in its historical past. used the phrases.

Answering the questions of Cihat Arpacik from Impartial Turkish, Turhan’s statements are as follows;


Based on TUIK knowledge, inflation was 83 p.c, whereas the Central Financial institution lately predicted that year-end inflation could be 65.2 p.c. There are feedback that inflation shall be proven decrease with the bottom impact, however will it drop by 20 factors in two months?

In December final 12 months, there was a month-to-month inflation of near 14 p.c. Month-to-month inflation will doubtless be round 5 p.c this 12 months. Due to this fact, 14 shall be subtracted from the annual inflation account and 5 shall be entered as a substitute. In January, inflation was 11 p.c final 12 months. This 12 months will probably be round 5-6%. Due to this fact, shut to five factors could lower in January. Due to this fact, after we come to the start of February, we’ll see a lower of 15 factors in whole. Because of this inflation shall be round 70 p.c on the finish of the 12 months and round 65 p.c on the finish of January.

What does 5% month-to-month inflation imply? Do not consider it as ‘I multiply 5 by 12 I get 60’. You have to compound annual inflation of 5 p.c per 30 days. This really corresponds to 80 p.c inflation. In different phrases, the momentary lower in annual inflation because of the excessive base impact of the earlier 12 months doesn’t imply that Turkey is profitable within the battle in opposition to inflation. The underlying development of inflation will nonetheless be pointing to 70-80 p.c each year.

Excessive wage will increase anticipated at first of the 12 months may also have an effect on different wages. Salaries of civil servants and pensions, along with a really giant price range deficit of 640 billion liras foreseen within the subsequent 12 months’s price range, the rise in public expenditures indicated by this, it’s extremely possible that the Central Financial institution has fully deviated from pursuing a financial coverage geared toward worth stability, because of the upcoming elections. The truth that credit score enlargement may also come to the fore… When all these components are introduced collectively and contemplating the strain of price will increase, it’s nearly inevitable that we are going to see a rise in annual inflation particularly in March, April and Could.

Final 12 months, there was 14 p.c inflation in a single month because of the change charge shock. We additionally noticed a really excessive inflation in January with the impact of the occupation of Ukraine by Russia. With the deactivation of this, we’ll see a lower in annual inflation in December-January; It’s true that by the tip of 2022 inflation will decline to round 70 p.c. That is a drop of over 10 factors from its present degree. It could even be attainable that this may come down slightly in January. However I believe we will see double-digit month-to-month inflation, particularly in March-April. If credit score enlargement is as robust as I believe, then Turkey could even must expertise a small pattern of hyperinflation that it has by no means seen in its historical past. However as I stated, we nonetheless have time forward, we do not want for it, however…


Up to now, rate of interest cuts had been closely mirrored in change charges. However within the final reductions, we see that this isn’t the case. What occurred?

Two issues are required for the Central Financial institution coverage charge to have an impact; first, a market economic system wherein costs are freely decided by the selections and preferences of producers and customers, and worth formation is realized based on provide and demand, and secondly, an open economic system is required. Sadly, Turkey has largely moved away from being an open economic system when it comes to capital flows. Inside, the free market economic system has once more misplaced its qualities to a substantial extent. Right now, the regulatory and supervisory authorities resolve who and at what worth the banks may give credit score. If you happen to take a look at the event of credit as the principle development, we see that credit score enlargement is considerably under inflation, that’s, credit are literally contracting in actual phrases. With out credit score, there shall be no financial enlargement, and the situations relating to TL shall be extraordinarily tight. Sadly, many corporations that produce in the true sector live and seeing this day by day. A whole lot of restrictions are imposed. They are saying that ‘you’ll be able to solely make loans out there to banks in opposition to invoices, you’ll be able to solely make them out there to those establishments, you can not give loans to those that will purchase a home above this worth in housing loans’. Very heavy cost-increasing provision rules and securities holding obligations are imposed on banks. Due to this fact, reducing the rate of interest has virtually no impact. In different phrases, banks can solely use the reserve cash they create with that low-interest borrowing to finance the treasury. That is why authorities bonds have low rates of interest, the Central Financial institution’s coverage charge is low, however inflation is excessive, and the change charge is just not affected by this. This may solely be attainable for an imaginary nation that may produce all its wants in its personal home market. The truth that rate of interest cuts usually are not mirrored on the change charge is just not one thing to be glad about. You possibly can examine this to a affected person within the intensive care unit who doesn’t react to exterior stimuli. This is a sign that the affected person’s situation is getting worse. I hope this error shall be corrected and the persistence of this error shall be stopped.

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