The change in Turkey's policy led to a reduction in economic imbalances and a restoration of confidence. Headline inflation has eased as tighter financial conditions weigh on domestic demand.
This is according to the position of the International Monetary Fund after the conclusion of the Article IV consultation. "Market sentiment improved sharply, with domestic and foreign investors flocking to pound-denominated assets, while lower commodity prices, buoyant exports and reduced gold imports strengthened the current account, supporting a significant improvement in both gross and the net reserve position", the IMF also notes.
Since last year, Turkey has implemented tight monetary and fiscal policies to address some of its major imbalances, including the current account deficit and foreign reserves, and to curb inflation.
The fund's statement said the "decisive shift" in economic policies over the past year had tightened Turkey's overall policy stance, adding that the Central Bank of the Republic of Turkey "brought the forward real interest rate into positive territory while reducing regulatory complexity'.
Turkey's central bank has raised its key interest rate by 4,150 basis points since June last year to curb rising inflation, which in September fell below the key rate for the first time since 2021.
The annual rate of inflation eased to 49.4% last month from nearly 52% in August and sharply down from 75.45% in May. Turkey's central bank raised interest rates to 50 percent from 8.5 percent, and the government raised taxes and some fees to boost revenue while implementing fiscal measures to balance risks in the economy. I BGNES
