Yavuz IŞIK
THBB Yönetim Kurulu Başkanı
President
July was a month when taxes were the talk of the town for our economy. While the increase in the SCT on fuel increased pump prices by more than 20 percent, similarly, the SCT regulation on natural gas was reflected in the price as an increase. The new economy administration, which has declared its will to implement rational policies, must continue to increase taxes in order to reduce the impact of electoral economic policies and the increased costs due to the earthquake on the budget before the election. It is because the six-month deficit of the central government budget reached 483,2 billion liras together with June’s 219,6 billion liras. Compared to the same period last year, expenditures increased by 101,7 percent, while the increase in income remained at 48 percent. Accordingly, the one-month deficit increased six times compared to the same month of the previous year.
Despite the developments on the interest side, economic actors still spend on the areas they consider as investments from their own viewpoint, rather than the (negative) deposit interest rate highly below the real inflation. It is certain that inflation, in which a downward trend due to the base effect is observed, will again enter a rapid upward trend. It is possible to predict that July inflation will be quite high following numerous tax increases, minimum wage increase, and the increase in the foreign currency rate, which will trigger inflation in July.
At its meeting on June 22, the CBRT expressed that by increasing the policy interest rate from 8,50% to 15% with a 650 basis point rate hike, monetary tightening would be gradually strengthened as and when necessary until a significant improvement in the inflation outlook is achieved. When we consider the expectation of a decrease in inflation, which has turned negative due to exchange rate movements, increasing costs, and rising taxes in the recent period, the Central Bank is not expected to increase the policy rate aggressively while it is clearly seen that monetary tightening should continue. When assessed together with the fact that the banking sector retrenched the credits for funding the real sector, we predict that economic activity will continue below expectations in the second half of the year.