Turkey inflation rate eases but still stubbornly high in December

Economists forecast that double-digit core inflation would persist throughout the first half of 2018. (AFP)
Updated 03 January 2018
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Turkey inflation rate eases but still stubbornly high in December

ANKARA: Inflation in Turkey eased slightly in December after reaching the highest rate in 14 years the month earlier, but remained stubbornly high at almost 12 percent, in a continued headache for policymakers, according to statistics released Wednesday.
Consumer prices rose by 11.92 percent year-on-year in December, the Turkish statistical institute said, down slightly from 12.98 percent in November, which was the highest annual rate recorded since 2003.
On a month-on-month basis, inflation stood at 0.69 percent in December from November, with the biggest price hikes seen in transportation, while clothing prices declined.
The Turkish central bank’s official inflation target is an annual rate of five percent, but double-digit data over the last months have made a mockery of this.
Nevertheless, the bank has been unwilling to make any substantial rate hikes to combat inflation, as President Recep Tayyip Erdogan is wary that raising borrowing costs could put the brakes on growth.
Economists at QNB Finansbank in Istanbul said the December reading of 11.92 percent was the highest year-end figure since 2003.
They forecast that double-digit core inflation would persist throughout the first half of 2018 and could take longer to fall if the lira stayed weak.
“We think inflation will continue to ease over the coming months,” added William Jackson, economist at Capital Economics in London, arguing the latest reading would take some pressure off the central bank for further tightening.
“Even so, headline inflation is likely to remain in double digits until late this year,” Jackson said in a note to clients.
Erdogan has built his popularity on solid stewardship of the economy in the wake of Turkey’s devastating 2000-2001 financial crisis. Any signs of economic weakness would be a bad omen for the Turkish strongman as he prepares for 2019 elections.
Turkey notched up impressive growth of 11.1 percent in the third quarter, but economists warn this masks growing risk factors, such as inflation and a high current account deficit.


Pakistan PM Khan expected to boost aid and trade from visit to Kingdom

Updated 18 September 2018
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Pakistan PM Khan expected to boost aid and trade from visit to Kingdom

  • Pakistan imports more than $13 billion of oil
  • Agriculture expected to be key focus

KARACHI: Faced with a financial crisis at home, Pakistan Prime Minister Imran Khan’s first visit to Saudi Arabia could provide a much needed boost to the country’s political and economic confidence, experts said on Tuesday.
The trip, which began on Tuesday, holds even more significance as Khan is expected to seek $2-$3 billion in economic aid from the Kingdom, with an urgent need to inject around $9 billion into the economy — to stabilize external accounts largely inflated from high imports and insufficient exports.
“Pakistan expects an injection of around $2 billion to $3 billion in order to stabilize its foreign reserves position, currency and external balance sheet,” Dr. Bilal Ahmed, senior economic analyst, told Arab News.
He added that Pakistan would largely benefit from the visit, especially if the Kingdom is convinced “to supply oil at concessionary rates which would mitigate pressure on the import bill to a large extent.”
During the last fiscal year, 2017-18, the country’s imports of petroleum stood at $13.27 billion, imported from different countries, including Saudi Arabia. “If Pakistan gets the oil at a deferred payment or at relaxed conditions the issue of the country’s cash will be resolved,” Syed Mazhar Ali Nasir, Senior Vice President of the Federation of Pakistan Chambers of Commerce and Industry — an apex body of Pakistan’s industrialists and traders — told Arab News.
Bilateral trade will be another key area of focus.
“We should explore avenues for exports to Saudi Arabia by ending tariff and non-tariff barriers that have decreased the trade of goods and services,” Dr. Ikram ul Haq, a senior economist and expert in legal matters, said.
Despite holding great potential, bilateral trade between Pakistan and Saudi Arabia is only $3.4 billion and largely in favor of Saudi Arabia.
Pakistan imported $3.1 billion worth of goods from the Kingdom during the fiscal year 2017-18, while exports stood at $316.7 million, data shared by the State Bank of Pakistan showed.
Suggesting new means to explore bilateral trade and investment — by relying less on traditional goods and services – Dr. Haq said: “Pakistan should try to win Saudi contracts for IT services as this is the area where we have potential to earn foreign exchange but we never tried. We must come out of traditional items like textile.”
Agriculture is another sector that Pakistan could tap into to seek Saudi investment through joint ventures, Dr. Haq said: “This area has potential to grow fast and create export surplus. Saudis investors can be lured for modern corporate farming in Pakistan to earn substantial profits.”