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Deutsche Bank revises Türkiye's inflation forecast to 40%

The logo of Deutsche Bank is seen in Brussels, Belgium December 6, 2022 (Reuters Photo)
The logo of Deutsche Bank is seen in Brussels, Belgium December 6, 2022 (Reuters Photo)
July 17, 2024 02:48 PM GMT+03:00

Deutsche Bank, a German multinational investmentbank headquartered in Frankfurt, has released its year-end forecasts for Türkiye, predicting that inflation will drop to 40% and the dollar will rise to ₺37. The German banking giant also expects a 500 basis points reduction in interest rates by year-end.

Inflation to decline

Hans-Christian Wietoska, Deutsche Bank's head of research for the Middle East and Eastern Europe, provided insights into Türkiye's economic outlook. He highlighted that Türkiye's net reserves have surpassed $10 billion, and international reserves are approaching $150 billion.

He stated that inflation has peaked, marking the completion of the first phase of economic stabilization. The next phase, he noted, involves a strong disinflation process, with inflation expected to drop to 40% by year-end. The challenge ahead will be reducing it further to 20%.

Interest rate expectations

Wietoska noted that with slowing economic growth and declining inflation, it would be an appropriate time for a rate cut. "We foresee a 500 basis points cut in November and December," he said. This is part of their base scenario, and further easing is expected at the beginning of the next year.

Dollar/TL forecast

Wietoska emphasized the importance of maintaining a tight monetary policy in Türkiye.

It's not going to be easy, but no country with 75% inflation has managed to reduce it without entering a recession. If Türkiye can balance its economy without a recession, it will set a unique example, and we are quite optimistic about this

Hans-Christian Wietoska

He warned against mid-term policy errors and noted that the year-end USD/TL forecast is ₺37, expecting a real appreciation of the TL.

July 17, 2024 02:48 PM GMT+03:00
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