Baku, Azerbaijan, Oct.5
By Leman Zeynalova - Trend:
It seems plausible that inflation in Turkey could rise to somewhere between 10 percent and 15 percent over the medium term (3-5 years), according to the analysts of the UK Capital Economics consulting company.
“Based on historical evidence and some of the academic research, that might be accompanied by a slowdown in GDP growth of close to 1%-pt, although we would emphasise that there is significant uncertainty surrounding this estimate,” analysts said in a report, obtained by Trend Oct.5.
Capital Economics analysts don’t think Turkey will return to the inflation rates of 50 percent plus seen in the 1980s and 1990s, but it does seem plausible that inflation might rise into the low-to-mid-double digits in the coming years, from an average of 8 percent in the past few years.
Even if the economic hit from higher inflation isn’t particularly large, there would be a tangible impact on local financial markets, according to the analysts.
Teasing out the impact of higher inflation on GDP growth is extremely tricky,” said the report. “To start with, the economic costs will depend on the extent to which inflation rises, how long it remains high for and the degree to which the transmission mechanisms are affected.”
The extent to which the economy adapts to higher inflation (e.g. via indexation) could also play a significant role, according to the Capital Economics.