Visiting the Bursa Chamber of Commerce and Industry, the Chairman of the Central Bank, Murat Uysal, used the following statements regarding economic developments:
* The weak course in global economic activity continued simultaneously in developed and emerging economies in the last quarter of 2019. The trade agreement between the USA and China, the decreasing uncertainties regarding the Brexit process and on the other hand, the supportive stance of global monetary policies since the second half of 2019 are some of the developments that affect the global growth outlook.
As a matter of fact, while economic activity improved somewhat in the European Union region in January, this situation positively affected our foreign demand and exports. However, despite the agreement between the USA and China, uncertainties still remain high, ongoing geopolitical risks and the recent epidemic disease keep downward risks on global growth.
“INFLATION RATES CAN BE CONTINUED HORIZONTAL”
* The weak course of global economic activity is decisive on commodity prices and inflation. Inflation rates are expected to continue to display a flat outlook in 2020, although some countries rose somewhat in the last quarter due to food prices.
* This outlook strengthens expectations that the central banks of developed countries will continue their monetary policies in an expanding manner, while enabling supportive monetary policies in developing countries.
* Due to the increasing uncertainties regarding global growth in the recent period, portfolio flows and risk appetite have been fluctuating. We closely monitor the effects of all these global developments through capital flows, foreign trade and commodity prices.
“HEALING CONTINUES”
Stating that the recovery in the economy has increased gradually throughout the year and gained power recently, Uysal continued his words as follows:
* In addition to the recovery in economic activity, investment and employment developments are also important for the permanence and inclusion of growth. In this context, when we first look at the investment developments, we see that the investment tendency of the firms continues to improve, including small and medium sized firms.
* We believe that the improvement in financial conditions contributed to this development. In addition to interest rate cuts, other measures such as reserve requirements also facilitate access to credit.
“IMPROVEMENT SUPPORTED THE DECREASE IN INFLATION”
Stating that the main determinant of the fall in inflation is tight monetary policy and coordinated policies implemented, Uysal said:
* Consumer inflation declined significantly in 2019. Tight monetary policy and coordinated policies implemented became the main determinant of the fall in inflation. Besides the cumulative exchange rate effects, demand conditions and moderate import prices, the improvement in inflation expectations and pricing behavior also supported the decrease in inflation.
Two main factors were decisive in the marked improvement in inflation expectations. The first one is the decrease in the realized inflation; The second is that since the end of 2018, inflation has been realized very close to or even below the estimates shared by the Central Bank’s Inflation Reports.
* Another prominent point regarding the improvement in inflation expectations is the spread of recovery to the general and a compromise around this expectation.
2020 AND 2021 INFLATION EXPECTATION
* At the point we have reached, the inflation outlook is largely in line with the forecasts announced in the January Inflation Report. Under the cautious monetary policy stance and strong policy coordination focused on reducing inflation, we maintained our end-2020 inflation forecast at 8.2 percent.
* We expect inflation to stabilize around 5 percent in the medium term after falling to 5.4 percent at the end of 2021. Numerous indicators that we follow for the main trend point to a course in line with the targeted decline in inflation.
* We anticipate that inflation will gradually decline towards our year-end forecast after remaining flat at current levels for a while.
* In the upcoming period, our cautious stance in monetary policy should be maintained in order to decrease the inflation in line with the target path.
* In this context, we will determine our monetary stance in a way that will ensure the continuity of the fall in inflation by taking into account the indicators regarding the main trend.
