Rising inflation expected following post-election lira slide, tax hikes

As the Turkish Statistical Institute (TurkStat) is set to reveal its inflation data for this month on October 3, it is anticipated that the Consumer Price Index (CPI) will rise, driven by the accelerated devaluation of the Turkish Lira and the increase in taxes following the recent elections.

According to a Reuters survey involving 10 economists, September CPI estimates range between 3.7% and 6.2%, with annual predictions fluctuating between 60% and 63.7%.

The Central Bank of the Republic of Turkey (CBRT) has also raised its September inflation forecasts. In the bank's latest inflation report, it is stated that "participants' year-end consumer price inflation (CPI) expectations increased from 59.46% in the previous survey period to 67.22% in this survey period."

The expectation for CPI 12 months from now has also increased from "42.01% in the previous survey period to 44.94% in this survey period," according to the report.

Furthermore, the report indicates that "the expectation for CPI 24 months from now, in the same survey periods, was 22.54% and 23.87%, respectively, while the year-end inflation forecast was raised from 22.3% to 58%."

Tax hikes

Shortly after the elections, in addition to the increased taxes on tobacco and petroleum, there were also hikes in corporate tax and Value Added Tax (VAT). The reason cited was the rise in costs due to the earthquake.

In addition to the one-time extra Motor Vehicle Tax, the Bank and Insurance Transactions Tax, and fees have also been raised. The impact of these increases has quickly pushed the previously seemingly stable CPI upward, approaching double-digit monthly figures in the last two months. (AEK/VK)