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    Positive, as expected and a question mark

    Fatih Özatay, PhD04 May 2013 - Okunma Sayısı: 746

    Taking into account the capacity utilization and real sector confidence figures for April, it is doubtful whether the recovery implied by import growth will be sustainable.

    I would like to make a brief assessment of the latest figures. As released yesterday, annual CPI inflation decreased remarkably from 7.3 percent in March to 6.1 percent in April. Similarly, all core inflation indicators decreased: headline inflation to which the Central Bank attaches special importance eased by 0.4 points month-on-month and decreased to 5.4 percent.

    FX and commodity prices

    In a statement in late April, the Central Bank estimated year-end inflation at 5.3 percent. There are a couple of factors that will determine whether or not actual inflation will be close to the estimated level. The downwards pressure on exchange rate will continue if the current circumstances in financial markets are retained. This will ease down inflation. Commodity prices have been low lately and this trend might continue in the months ahead, which is another factor that will keep inflation at low levels. There are two indicators that will work in the opposite direction, however: deposit rates are below inflation, which incentivizes consumption. The Central Bank declared that the 15-percent credit growth threshold was a flexible point of reference rather than a target, so the Bank will allow higher credit growth rates. This, by encouraging demand, might push up inflation. In the light of the available information, factors that will push inflation down appear to be stronger. Year-end inflation around 6-7 percent seems to be achievable.

    I also want to address export and import figures in line with the growth estimations for Turkey’s export markets. The expectation was that non-gold export performance would not be significantly different than last year. Besides, the estimates were revised downwards recently. The export figure for the first three months was in line with expectations: 4.7 percent year-on-year growth. Recently, the Turkish Exporters’ Assembly released the non-gold export figure for April. The figure demonstrates a year-on-year increase by 4.9 percent, compared to 4.3 percent in 2012. Therefore, export growth in the first four months of the year was only slightly stronger than in 2012. This supports the expectation that exports will not make a significant contribution to growth in 2013.

    In the first quarter, non-gold and non-energy imports increased year-on-year by 5.4 percent. This is contrary to 2012, when imports decreased year-on-year in all quarters. Last year overall, non-gold and non-energy imports decreased by 6.5 percent. This implies that economic activity level might have increased in the first quarter. Nevertheless, it is worth noting that the increase in non-gold and non-energy imports was rather small in March: 1.4 percent. Taking into account the capacity utilization and real sector confidence figures for April, it is doubtful whether the recovery implied by import growth will be sustainable.

    This commentary was published in Radikal daily on 04.05.2013

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