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POLL-Turkey’s annual inflation is expected to decline to 66.8% in December, 43.2% a year later

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Reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=TRCPI%3DECI for monthly poll

Reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=TRCPIY%3DECI for the annual poll

ISTANBUL, December 28 (Reuters)Turkey’s annual inflation is expected to fall sharply to 66.8% in December due to a favorable base effect but only drop to 43.2% by the end of 2023, a Reuters poll showed on Wednesday. while monthly price increases are expected to remain high.

The end-2023 forecast is nearly double that of the government and raises the prospect of continued tensions over the cost of living as Turks vote in tight presidential and parliamentary elections next year.

Inflation peaked at around 85.5%, a 24-year high, in October after rising for 17 months, mainly due to President Tayyip Erdogan’s unorthodox monetary policy of low interest rates and the crisis monetary policy that resulted last year.

Inflation fell slightly in November and the decline is expected to deepen in December, and in the first quarter of the yearwhen soaring prices during the same period last year ease the calculation of this year’s annual inflation.

In the Reuters poll of 12 economists, the median estimate for December annual inflation was 66.8%. The forecast ranged between 64.60% and 69.1%, broadly in line with the government forecast of 65%.

Prices continue to rise strongly month over month with a median estimate at 2.7%, within a wide range of 1.40% and 4.10%.

The direction of auto and food prices could create uncertainty around December inflation due to changes to special vehicle consumption tax brackets in late November, said Deniz Cicek, an economist at QNB Finansbank.

“Fuel prices fell alongside oil prices this month (while) electricity and natural gas prices were stable…(N) we expect the energy group to reduce headline inflation in December,” Cicek said, adding rising demand for furniture, electronics and food prices.

Despite soaring prices, the central bank has cut its key rate by 500 basis points since August to 9%, citing an economic slowdown. The easing was part of Erdogan’s economic program prioritizing exports, production, investment and employment.

The lira has lost 44% of its value against the dollar in 2021, mainly during the December currency crisis triggered by last year’s rate cuts. It has fallen another 30% this year to historic lows, but has remained virtually flat for the past two months.

Ankara says the program will help turn Turkey’s chronic current account deficits into a surplus, which it says will lead to a sustained decline in inflation.

However, economists see inflation falling to just 43.2% by the end of 2023, according to the median estimate of eight economists in the Reuters poll, with forecasts of between 33% and 48%.

Ankara forecasts inflation of 24.9% by the end of 2023, according to medium-term economic projections, and does not expect a current account surplus at least in the next three years.

The Turkish Statistical Institute is expected to announce December inflation data at 07:00 GMT on January 3.

(Reporting by Ali Kucukgocmen and Ezgi Erkoyun; Editing by Jonathan Spicer)

((ali.kucukgocmen@thomsonreuters.com, @alikucukgocmen; +905319306206; Reuters Messaging: Reuters Messaging: ali.kucukgocmen.thomsonreuters.com@reuters.net))

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