Falling inflation is a positive sign for the country battling with dramatic price rises and a weak lira.
Turkey’s annual inflation rate dropped for the ninth month in a row to 39.1% in February, easing from 42.1% in the previous month, according to the Turkish Statistical Institute.
This was below market estimates of 39.9%, as well as being the lowest figure since June 2023.
The total also marks the first time inflation has fallen below 40% in 20 months.
February’s lower figure was primarily due to easing price pressures for clothing and healthcare.
Footwear and clothing inflation cooled to 20.8% in February, down from 27.5%, while health inflation eased to 43% in February, down from 55% in January.
Non-alcoholic beverages and food inflation came in at 35.1% in February, down from 41.8% in the previous month.
Household equipment, furnishings and routine maintenance inflation came in at 33.6% last month, down from 35.3% in January.
Positive sign for Turkey
February’s inflation print could be a sign of Turkey starting to recover somewhat from its recent economic problems, although significant challenges remain.
When faced with surging inflation, the Central Bank of the Republic of Turkey slashed interest rates, a method supported by President Recep Tayyip Erdoğan.
This was very different from most other major central banks’ strategies to deal with high inflation, which usually involved hiking interest rates.
Turkey’s central bank subsequently abandoned this strategy when the lira plunged and inflation soared.
Although it has now raised interest rates considerably, Turkey’s inflation rate is still significantly high compared to most other countries.
Improved growth
Turkey’s gross domestic product grew 3% on an annual basis in the last quarter of 2024, which was a step up from the third quarter’s 2.2%, as well as ahead of analyst estimates of 2.6%.
This was the strongest growth seen since the first quarter of 2024 and was primarily boosted by robust household consumption.
A marked rise in fixed investments, as well as increased government spending also contributed to the fourth quarter’s higher GDP, although falling exports capped gains somewhat.
Turkey is seeking to stabilise the lira by narrowing its trade gap, increasing exports and reducing imports.
The country’s central bank is holding a monetary policy meeting on Thursday and is expected to lower its key rate by 250 basis points.
