According to economists, the closing period may create uncertainty in inflation measurement, some prices may change less in May.


© Reuters.

Nevzat Devranoglu

ANKARA, May 5 (Reuters) – According to economists, who evaluated the impact of the restrictions that will last until May 17 due to the coronavirus on inflation, the fact that the prices of some products that could not be sold during this period did not change, may cause inflation to be lower due to the effect of these products in May.

Economists point out that this effect of the closure will disappear with the end of the closure, that is, in June. Reminding that a similar process was also experienced during the pandemic period, economists also want TurkStat to provide more detailed information on price collection during closures.

On the other hand, inflation-indexed bonds and lease contracts stand out as the first areas to be affected in this process, albeit temporarily.

Economist Uğur Gürses answered Reuters’ question about how the ban on the sale of closed workplaces and certain products during the closing period would affect the inflation account as follows:

“There are 415 items of goods and services in the index that TURKSTAT calculates inflation. There are different products that TurkStat collects prices daily, weekly and twice a month. The most important issue in May is how we will measure real inflation. There will be confusion because the price of products for which prices are collected once a week. There will be products that cannot be bought.” said and added:

“The first week and the last week of the month are used for products that will collect prices twice a month. This month, prices will be charged once for most products and services, and this will probably not be a completely healthy measurement. The rate that will be announced as May inflation will not actually measure inflation. ‘s should not look at the data for May and show a more relaxed stance.”

President Tayyip Erdoğan announced new closure measures that started at the end of April and will end on May 17, following the increase in coronavirus cases despite the tightened measures.

In the announced measures, there was no restriction on production and curfews, which mostly affected the services sectors, began to be implemented.

Some of the measures were later changed with circulars due to incoming demands and problems in implementation.

The last example of this was the decision to open the market places selling fresh vegetables, fruits and seedlings on 8 and 15 May, unlike the first announced.

The circular on “Market Places”, which was sent by the Ministry of Interior to the governorship of 81 provinces yesterday, came after the images of some producers throwing the crops they collected in the trash were published on social media yesterday.

Stating that limited price collection may come to the fore again with the reopening of the marketplaces, Gürses said, “Turkstat should specify this issue in advance with a special statement, because inflation-indexed bond interests, lease contracts and wage contracts are the related areas that will come to mind first.”

Another economist, “The services side is closed during this period. The same has happened in the past. With the closure of the service side, inflation will be lower. What will happen on the goods side? Certain places are selected, prices will be collected from those points and the markets do not sell everything, they will get the last valid price. Therefore, compared to the previous month, this is the case. There will be no change in products, or the required increase or price change will remain in June when the economy opens. Inflation will be reflected with a delay of 1 month.” said

The Central Bank (CBRT) raised its year-end inflation forecast from 9.4% to 12.2% last week, but this is well below the market expectation of 14%. In the (CBRT) May expectation survey released today, the year-end CPI expectation rose to 13.81% from 13.12% in the previous survey.

While the year-end inflation forecast was over 14% in the Reuters polls, economists have recently started to make further upward revisions. While the peak estimates have shifted from April to May due to the recent depreciation in TL, there is a possibility of exceeding the policy rate of 19%. Economists therefore thought that the possibility of an increase in the policy rate could occur.

Kavcıoğlu asked when inflation will reach its peak this year, “Regarding inflation, we anticipate that April data will form the peak in our baseline scenario. For the reasons we have stated in the report, we foresee that March inflation will be above 17%. We expect inflation to come down after this month.” gave the answer.

Consumer Price Index (CPI) rose to a record level of 2 years with 17.14% in April due to the depreciation of TL. In April, producer inflation exceeded 35%.

TURKSTAT could not be reached at the time of writing.

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