Turkeys inflation fell in May due to free natural gas

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Turkish annual inflation is seen dropping below 40% in May, to its lowest since late-2021, a Reuters poll showed on Wednesday, as the government's decision to provide natural gas free of charge offset price rises in other goods.

The median estimate for May annual inflation was 39.2%, based on 15 economists polled by Reuters. Forecasts ranged between 38% and 40.9%.

On a monthly basis the median estimate was for a 0.20% fall in prices, in a range between a 1.1% drop and a 1% rise. The weight of natural gas in the inflation basket is 2.9%.

Ahead of this month's elections, President Tayyip Erdogan promised that gas would be provided for free in May and 25 cubic meters of natural gas would be provided monthly to households free of charge for one year until May 2024, a move that will cost the government 40 billion lira ($2.05 billion).

On Monday, Turkish Statistical Institute (TUIK) said that a 'zero price' method would be applied for natural gas in calculations of the May consumer price inflation and the free gas over the next year would also be reflected in calculations.

Erdogan has urged monetary stimulus over the last several years, aiming to achieve price stability by slashing borrowing costs, boosting exports and flipping chronic current account deficits to surpluses.

Inflation has been stoked by a late-2021 currency crisis and it touched a 24-year peak of 85.51% in October. It eased to 43.68% by April with a favourable base effect and relatively stable lira.

However, the lira hit a series of record lows and touched 20.75 on Wednesday, weakening some 10% since the start of the year, as President Erdogan won Sunday's elections and extended his rule into a third decade.

Investors are focusing on the new cabinet and whom Erdogan will appoint to top economic management roles and whether there will be a course change towards economic orthodoxy.

The median estimate for inflation at year-end stood at 45% in the Reuters poll, with forecasts coming in between 33% and 51%.

The Turkish Statistical Institute will announce May inflation data at 0700 GMT on June 5.

Turkey's inflation fell in May due to free natural gas

Turkey

Inflation

Fell

May

Free

Natural

Gas

Finance

Economy