Türkiye + 1 more

Turkey - Emergency Social Safety Net Market Bulletin: Issue No. 3, Quarter 3 2017



  • Turkey’s annual consumer prices accelerated for the second month in a row in September, rising to 11.20 percent from 10.70 percent in August.

  • The upward trend in annual inflation was partly driven by a 12.5 percent year-on-year surge in food prices.

  • In September 2017, the revised refugee MEB, relying on TurkStat consumer prices, cost an average of 1,894 TL for a household of six, or 316 TL per capita.

  • The average cost of the MEB has increased by 1.74 percent in the last three months.

Turkey Macroeconomic Context

Along with the upturn in domestic demand, the Turkish economy grew by 5.1 percent annually in Q2 2017. The Q1 growth rate, which was previously announced as 5 percent, was revised up to 5.2 percent. As inflation and inflation expectations remain high, the need for tight monetary policy is reinforced in pursuit of the price stability objective

Currency volatility, which peaked in Q4 2016, is still affecting inflation. Turkey’s inflation figures picked up for a second straight month in September, reaching an annual rate of 11.20 percent, TurkStat data showed. Since the beginning of 2017, annual consumer prices saw their lowest level in January, at 9.22 percent, and hit its highest at 11.87 percent in April. Monthly consumer price inflation came in at 0.65 percent in September, below market expectations (compiled by Reuters’ survey) of 0.76 percent.

The highest annual consumer price index (CPI) increase was recorded in Gaziantep-AdiyamanKilis at 12.89 percent, meanwhile the highest monthly CPI increase was in Izmir at 1.08 percent. Among the main expenditure groups, the highest annual increase was in ‘transportation’ at 16 percent, followed by ‘food and non-alcoholic beverages’ at 12.5 percent.

As noted in the September minutes of the Monetary Policy Committee (MPC) meeting, the Central Bank of the Republic of Turkey (CBRT) will closely monitor inflation and maintain its tight monetary policy stance until the inflation outlook is aligned with the targets. According to the CBRT quarterly inflation report, which was released in August, the bank predicts an inflation rate of 8.7 percent by the end of 2017, but aims to reach 5 percent inflation in the medium term.

Leading indicators, such as August’s Industrial Production and September Purchasing Manager’s Index, suggested that economic activity remained strong in Q3 2017. Improvements in overall business conditions were sustained for the seventh successive month, which is the longest period of consecutive growth since 2014. According to the notes from September’s MPC meeting, strengthening economic activities appeared widespread across sectors, such as construction, retail trade and service.

However, consumers are yet to be convinced of the improvements in the economic situation, as the consumer confidence index lagged behind at 68.7 in September, a drop by 3.4 percent from August. The index was at 66.9 in January, and it hit its highest level at 72.8 in May.

Turkey’s Medium-Term Economic Programme (MTP) was introduced on September 27, targeting an annual economic growth of 5.5 percent between 2018-2020. During this period, Turkey will focus on reducing inflation, creating more jobs, and providing a fair income distribution, all the while maintaining macroeconomic stability. The 2018-2020 central government budget will be prepared in line with the economic goals, and monetary policy objectives.

The unemployment rate rose to a 4-month high in July, advancing to 10.7 percent in July from 10.2 percent in June, according to TurkStat data. This was the highest since March, when the unemployment rate was at 11.7 percent. There were 3.44 million unemployed people in Turkey in July versus 3.32 million a year earlier. On a seasonally adjusted basis, the unemployment rate rose to 11.2 percent from 11.1 percent in June. The seasonally adjusted youth unemployment rate [including age group 15-24], however, was reported to be 21.1 percent, a 0.1 percentage point decrease when compared to the previous month.