17
Activities
continued. In 2015, the current account
deficit decreased by US Dollar 11.4 billion
year-on-year to US Dollar 32.2 billion. The
share of direct investments in financing of
the current account deficit reached 36%.
Turkey maintained fiscal discipline.
Fiscal discipline continued to be the
strong feature of the Turkish economy in
2015. During the year, budget revenues
and expenditures increased by a similar
percentage. In 2015, the fiscal deficit
contracted by 3.3% to TL 22.6 billion,
remaining below the year-end projection of
the Medium Term Program.
Inflation came in above its
year-end target.
While increases in food prices continued to
affect the consumer price index in 2015,
the cumulative effect of the depreciation
in the Turkish lira resulted in an inflation
that was significantly above the medium
term target throughout the year. On the
other hand, low energy prices eased the
upward pressures on the inflation to some
extent. In light of these developments, the
annual inflation rate was at 8.81%, above
the medium term target of 5% set by the
Central Bank of the Republic of Turkey
(CBRT).
The CBRT keeps its cautious
monetary policy stance.
In parallel to commodity prices supporting
the fall in the inflation rate at the beginning
of 2015, the CBRT decided for moderate
cuts in the one-week repo interest
(the policy interest rate), in January and
February. As a result, the policy interest
rate which was at 8.25% at end-2014,
was lowered to 7.5% as of February 2015.
The CBRT also reduced the floor and
ceiling levels of the interest rate corridor
with decreasing the lending interest rate
from 11.25% to 10.75% and lowering the
overnight borrowing interest rate from
7.5% to 7.25%. In the following period, as
the depreciation in the Turkish lira limited
the improvement in inflation indicators, the
CBRT decided not to change interest rates.
Instead, the CBRT preserved its cautious
monetary policy stance by effectively
utilizing the flexibility offered by the
interest rate corridor via liquidity policy in
response to the increase in volatility in the
domestic market throughout the year.
The CBRT announced in its roadmap in
August that it would simplify its monetary
policies in line with normalization in global
monetary policies. Following the interest
rate hike decision of the Fed, the CBRT
signaled, at its meeting in December, that
it could begin taking steps in this direction
within 2016.
Inflation and FC Basket
(*)
(Annual Change) (%)
14
12
10
8
6
4
2
0
30
25
20
15
10
5
0
-5
-10
PPI
CPI
FC Basket (right axis)
January 13
February 13
April 13
March 13
May 13
June 13
July 13
August 13
September 13
October 13
November 13
January 14
April 14
July 14
October 14
August 14
May 14
February 14
December 13
March 14
June 14
September 14
November 14
January 15
April 15
July 15
October 15
August 15
May 15
February 15
December 14
March 15
June 15
September 15
December 15
November 15
(*)
Currency Basket (0.5*
€
+0.5*USD) is calculated using monthly average currency rates of CBRT.
