Inflation, Industrial Production and Current Account Deficit

Turkey is not invincible (contrary to the economy ministers' "bize bisey olmaz" comments at the beginning of the year).

Turkish industrial output grew at the slowest pace this year in June, signaling the $660 billion economy is cooling as rising fuel, food and credit costs weaken consumer confidence, reported Bloomberg.

Production rose 0.8 percent from a year earlier, compared with a 2.4 percent pace in May, The Turkish Statistical Institute, or TÜİK, said on its Web site Friday. Output was expected to rise by 2.5 percent, according to the median estimate of 11 economists surveyed by Bloomberg.

Latest Inflation Expectations:

Turkey's inflation rate will probably fall to 8.68 percent in 12 months time, according to the Central Bank's latest survey of businesses and economists.The forecast rose from 8.61 percent two weeks ago, the Ankara-based bank said on its Web site Friday. The estimate for inflation in 24 months increased to 7.30 percent from 7.21 percent, and the year-end forecast rose to 11.01 percent from 10.76 percent, it said.Inflation in July accelerated to 12.1 percent, the highest in more than four years, from 10.6 percent a month earlier.

Current Account Deficit was not a problem 2 years ago, the government had some time to implement micro (structural) reforms to rectify the problem. Not much was done. Sooner or later the market will correct itself. Here are the latest numbers:

Turkey's current account deficit widened for a 13th straight month in June as energy prices rose, increasing the likelihood the lira will weaken. The gap expanded to $5.6 billion from $3.1 billion in the same month a year earlier, the Central Bank in Ankara said on its Web site Friday. The gap was forecast at $5 billion, according to the median estimate of 15 economists surveyed by Bloomberg. Higher energy prices are pushing up the import bill, while the global credit crunch cuts the foreign investment Turkey needsto finance the current account deficit. The gap is likely to reach a record $50 billion this year and the financing situation is”worrying,” Moody's Investors Service said July 9.