Turkey: Briefing on January 2017 Inflation Report - 31 January

Transcription

1. Briefing on January 2017 Inflation Report 31 January 2017 Ankara
2. January 2017 Inflation Report : Main Sections Overview International Economic Developments Inflation Developments Supply and Demand Developments Financial Conditions and Monetary Policy Public Finance Medium Term Projections 2
3. January 2017 Inflation Report : Boxes Global Uncertainty and Its Spillovers: Recent Developments Import Prices and Exchange Rate Pass-Through to CPI and Subcategories An Aggregate Economic Uncertainty Measure For Turkey Assessing Output Gap with Alternative Measures Credit Growth and Weakening of the Relationship Between Real Trade Deficit and National Income The Size of the Open Market Operations Portfolio and Outright Purchase Auctions Cyclical Variation of Government Spending Multiplier An Evaluation of end-2016 Inflation Forecasts 3
4. Global Uncertainties and Portfolio Flows 3 ,5 3,0 10-Year Bond Rates Portfolio Flows to Emerging Economies (Percent) (4-Week Cumulative, Billion USD) Germany United States United Kingdom Japan 3,5 30 3,0 20 2,5 2,5 2,0 2,0 Equity Funds Bond Funds 10 0 1,5 1,5 1,0 1,0 0,5 0,5 0,0 0,0 -30 -0,5 -0,5 -40 -10 Source: Bloomberg. 01.17 11.16 09.16 07.16 05.16 03.16 01.16 11.15 09.15 07.15 05.15 03.15 01.15 01.17 10.16 07.16 04.16 01.16 10.15 07.15 04.15 01.15 10.14 07.14 04.14 01.14 10.13 07.13 04.13 01.13 -20 Source: EPFR. In the fourth quarter of 2016, interest rates in advanced economies increased, directing capital flows away from emerging markets into advanced economies as of November. 4
5. Domestic Economic Outlook Domestic financial markets remained volatile over the fourth quarter of 2016 . Credit use has shown some recovery in recent months thanks to the measures taken. Consumer inflation ended 2016 at 8.53 percent amid the TL depreciation, tax adjustments and the partial increase in food prices. Economic activity displayed a significant slowdown in the third quarter. Thanks to accommodative measures and incentives, economic activity is likely to remain on a moderate upward track. Domestic demand remained relatively subdued but the growing EU demand continues to stimulate exports. Commodity prices are expected to gradually have less of a positive influence on the current account in the upcoming period however the current account balance will continue to improve with the recovery in the net exports of goods. 5
6. Monetary Policy and Financial Stability 6
7. Monetary Policy CBRT Rates and BIST Interbank O /N Repo Rate CBRT Funding (Percent) (2-Week MA, Billion TL) Interest Rate Corridor CBRT Average Funding Rate (5-Day MA) BIST O/N Repo Rates (5-Day MA) 1 Week Repo Rate Late Liquidity Window Lending Rate 13 12 13 12 11 Marginal Funding* Late Liquidity Window One Week Repo Net Open Market Operations 120 120 100 100 80 80 60 60 40 40 11 Source: BIST, CBRT. 01.17 12.16 11.16 10.16 09.16 0 08.16 0 07.16 6 07.16 6 06.16 20 01.17 20 12.16 7 11.16 7 10.16 8 09.16 8 08.16 9 07.16 9 07.16 10 06.16 10 * Marginal funding is overnight funding quoted at the upper band of the interest rate corridor. Source: CBRT. The CBRT implemented monetary tightening in order to contain the deterioration in inflation outlook due to excessive fluctuations in exchange rates stemming from increased global uncertainty and high volatility. 7
8. Monetary Conditions Yield Curve on Cross Currency Swaps Currency Swap Rates (Percent) (5-Day Moving Average, Percent) 13,0 October 27 - January 30 Average 27-Oct-2016 30-Jan-2017 8,5 8,0 8,0 Maturity (Month) Source: Bloomberg. 84 120 2 5-year Swap Rate 0 0 -2 -2 01.17 8,5 2 12.16 9,0 10.16 9,0 4 3-month Swap Rate 08.16 9,5 5 Year-3 Month Interest Differential 07.16 9,5 4 05.16 10,0 60 6 03.16 10,0 48 6 02.16 10,5 12.15 10,5 10.15 11,0 36 8 09.15 11,0 24 8 07.15 11,5 05.15 11,5 12 10 04.15 12,0 6 10 12,5 12,0 3 12 02.15 12,5 12 01.15 13,0 Source: CBRT. The yield curve recently became flatter due to monetary tightening. 8
9. Financial Stability Annual Credit Growth TL Commercial Loan Rates (Adjusted for Exchange Rate, Percent) (Flow, Annualized, 4-Week MA, Percent) 25 25 20 20 15 25 25 20 20 15 15 15 10 10 Commercial Loans* 10 Commercial 5 5 Total Medium SME Consumer Small SME 01.17 12.16 10.16 09.16 08.16 06.16 05.16 04.16 02.16 01.16 12.15 10.15 09.15 08.15 06.15 05.15 04.15 03.15 5 5 03.15 04.15 05.15 06.15 07.15 08.15 09.15 10.15 11.15 12.15 01.16 02.16 03.16 04.16 05.16 06.16 07.16 08.16 09.16 10.16 11.16 12.16 01.17 0 0 Source: CBRT. 10 Micro SME * Excluding overdraft accounts, credit cards and non-zero interest rate loans. Source: CBRT. Loans extended to the non-financial sector displayed a mild recovery in the fourth quarter of 2016, on the back of a strong increase in consumer loans. 9
10. Macroeconomic Developments and Main Assumptions 10
11. October 2016 Inflation Report Forecasts and Realizations Inflation Excluding Unprocessed Food and Tobacco (Percent) Consumer Inflation (Percent) October IR Forecast* 10 October IR Forecast* Realization 5 5 12.16 6 06.16 6 03.16 7 12.16 7 09.16 8 06.16 8 03.16 9 12.15 9 12.15 Realization 09.16 10 * Shaded region indicates the 70 percent confidence interval for the forecast. Source: TURKSTAT, CBRT. Consumer inflation ended the year at 8.53 percent mainly due to the volatility in unprocessed food prices and adjustments in the prices of tobacco products. Inflation excluding unprocessed food and tobacco posted a smaller upturn. 11
12. Inflation Food , Energy and Alcoholic BeveragesTobacco Prices (Annual Percent Change) Energy 16 Food Alcohol-Tobacco (right axes) Core Inflation Indicators (SA, 3-Month MA, Annualized, Percent) 35 20 H 20 I 14 30 12 25 10 8 15 15 10 10 5 5 0 0 20 6 15 4 2 10 0 5 Source: TURKSTAT, CBRT. 12.16 09.16 06.16 03.16 12.15 09.15 06.15 03.15 12.14 09.14 06.14 03.14 12.16 09.16 06.16 03.16 12.15 09.15 06.15 03.15 12.14 09.14 06.14 03.14 0 12.13 -4 12.13 -2 Source: TURKSTAT, CBRT. Despite the downward pressure from economic activity, inflation outlook deteriorated in the fourth quarter due to tax hikes, strong cost pressures and the partial increase in food prices. 12
13. Aggregate Demand GDP and Final Domestic Demand (Real, Seasonally Adjusted, 2009=100) Contributions from the Expenditure Side (Percentage Point) 170 170 GDP 160 Domestic Demand 140 140 130 130 120 120 110 110 100 100 90 90 80 80 Source: TURKSTAT. Net Exports Other* Domestic Demand GDP 15 150 2007 2008 2009 2010 2011 2012 2013 2014 2015 16 20 160 150 123412341234123412341234123412341234123 20 15 10 10 5 5 0 0 -5 -5 -10 -10 1 2 3 4 1 2 3 4 1 2 34 1 2 3 4 1 2 3 4 1 2 3 4 12 3 2010 2011 2012 2013 2014 2015 16 * Other item comprises change in stocks and statistical discrepancy due to the use of chain linked index. Source: TURKSTAT Economic activity displayed a significant slowdown in the third quarter. 13
14. External Balance Current Account Balance (12-Month Cumulative, Billion USD) CAB 30 30 CAB (excluding gold) CAB (excluding energy and gold) 10 10 11.16 05.16 11.15 05.15 11.14 05.14 -90 11.13 -90 05.13 -70 11.12 -70 05.12 -50 11.11 -50 05.11 -30 11.10 -30 05.10 -10 11.09 -10 Source: CBRT. The improvement in the current account balance is expected to continue. 14
15. Revisions in Oil and Import Price Assumptions Oil Prices (USD/bbl) Import Prices (Index, 2010=100) 100 100 105 January 2017 October 2016 80 105 January 2017 October 2016 80 95 60 95 60 40 Actual 85 85 75 75 40 Source: Bloomberg, CBRT. 12.17 09.17 06.17 03.17 12.16 09.16 06.16 03.16 12.15 09.15 06.15 03.15 12.17 09.17 06.17 03.17 12.16 09.16 06.16 03.16 12.15 09.15 06.15 03.15 20 12.14 20 12.14 Actual Source: CBRT. Due to recent developments, assumptions for crude oil prices were revised upwards to USD 57 while assumptions for USD-denominated import prices saw a limited downward revision for 2017. 15
16. Revisions in Assumptions October 2016 January 2017 2016 Q3 -1 ,5 -2,2 2016 Q4 -1,2 -2,0 Food Prices (Year-end Percent Change) 2017 2018 7,0 7,0 9,0 7,0 Import Prices (Average Annual Percent Change, USD) 2016 2017 2018 -9,2 3,2 - -9,2 3,0 0,7 Oil Prices (Average, USD) 2016 44 44 2017 54 57 2018 - 58 2016 1,7 1,8 2017 1,8 1,9 2018 - 1,9 Output Gap Export-Weighted Global Production Index (Average Annual Percent Change) 16
17. Inflation Outlook Inflation and Output Gap Forecasts (Percent) Forecast Range* Uncertainty Band Year-End Inflation Targets Output Gap Given a tight policy stance that focuses on bringing inflation down, inflation is estimated to converge gradually to the 5% target. Control Horizon 11 11 9 9 7 7 5 5 3 3 1 1 Accordingly, inflation is expected to be between 6.6% and 9.4% (with a mid-point of 8%) at end-2017 be between 4.2% and 7.8% (with a mid-point of 6%) at end-2018 with 70 percent probability. 12.19 09.19 06.19 03.19 12.18 09.18 06.18 03.18 12.17 09.17 06.17 03.17 12.16 09.16 -3 06.16 -3 03.16 -1 12.15 -1 Inflation is likely to be 8% in 2017, and stabilize around 5% in 2019 after falling to 6% in 2018. *Shaded region indicates the 70 percent confidence interval for the forecast. 17
18. Inflation Outlook Inflation and Output Gap Forecasts (Percent) Forecast Range* Uncertainty Band Year-End Inflation Targets Output Gap The upward revision in 2017 yearend inflation forecasts by a total of 1.5 points, relative to October Inflation Report, is driven by; Control Horizon 11 11 9 9 7 7 5 5 downward revision on output gap forecasts (-0.4 points), upward revision on 2017 food inflation forecasts (0.4 points), higher-than projected inflation at end-2016 compared to previous forecasts and the rise in core inflation indicators (0.2 points). 12.19 09.19 06.19 03.19 12.18 09.18 06.18 03.18 12.17 09.17 -3 06.17 -3 03.17 -1 12.16 -1 09.16 1 06.16 1 03.16 3 12.15 3 upward revision on assumptions for TL-denominated import prices (1.3 points), *Shaded region indicates the 70 percent confidence interval for the forecast. 18
19. Briefing on January 2017 Inflation Report 31 January 2017 Ankara