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Turkey’s finance minister predicts single-digit inflation by mid-2023

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ISTANBUL (Reuters) – Turkey’s annual inflation rate will be in the single digits by the time presidential and parliamentary elections scheduled for mid-2023 are held, Finance Minister Nureddin Nebati said on Saturday.

Inflation hit a 19-year high of 36% in December after the central bank cut interest rates under pressure from President Tayyip Erdogan, sparking a currency crisis that saw the lira lose 44% of its value value in 2021.

Addressing heads of non-governmental organizations in Istanbul, Nebati said Turkey’s only problem now was high inflation and the lira’s exchange rate volatility had subsided.

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“With the fiscal policies and the measures we will take, we will go into elections…next year with single-digit inflation,” Nebati said.

“We’re all going to experiment, see the change after the first quarter (of 2022),” he said of inflation.

Despite promises from government officials to bring inflation down quickly, economic analysts believe it could exceed 50% in the coming months and remain high throughout the year.

The currency crisis was halted last month, in part thanks to costly monetary interventions and government incentives aimed at reducing the attractiveness of the dollar for savers.

Turks grabbed hard currency as the lira fell to record lows against the dollar, and Turkish currency and gold holdings hit a record high of $238.97 billion in December before falling slightly to $234.3 billion on January 7.

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Nebati said on Saturday that the conversion of foreign currency holdings into Turkish liras would accelerate in the coming weeks.

“The decline of forex deposit accounts has begun. We will see the downward trend in forex deposit accounts continue rapidly,” he said, adding that central bank reserves would also rise.

Nebati said as of late Friday more than 131 billion lira ($9.69 billion) had been deposited in accounts under the government program that protects lira deposits from forex depreciation.

Speaking in the western province of Aydin, Erdogan said the lira protection program had marred foreign economic “attacks”.

“Over the past few years, they have specifically targeted our economy. They made countless efforts to create an economic crisis followed by political and social chaos,” he said.

Erdogan said Turkey was targeting $35 billion in tourism revenue this year and $250 billion in exports.

($1 = 13.5214 liras) (Reporting by Ali Kucukgocmen, editing by Mark Heinrich and Timothy Heritage)