Budget discipline was maintained.
The strong performance of the central government budget
continued in 2013, as well. Domestic demand was reflected
positively on tax revenues. At the end of 2013, budget revenues
increased by 17.1%, while budget expenditures increased by
12.7%. Accordingly, the budget recorded a deficit of TL 18.4
billion in 2013 whereas it recorded TL 29.4 billion in 2012.
Inflation remained above the year-end target.
Due to the increase in unprocessed food prices and the
depreciation of the TL, annual increase in CPI reached 8.88%
in July, the highest level of 2013. Annual CPI started to decline
again thanks to the base effect and was realized as 7.4% at the
end of the year. The acceleration of the depreciation of the TL
in the second half of the year limited a further decline in the CPI.
The CBRT’s decision: Monetary tightening
In the first months of 2013, CBRT gave more weight to
monetary policies supporting economic activity by cutting the
interest rates while implementing macro-prudential measures.
In the second half of the year, on the other hand, capital
outflows from developing markets, including Turkey, were
observed over the concerns on Fed’s tapering of asset
purchases. This led to a depreciation of the TL and increased
upward pressures on inflation. In order to maintain price
stability and support financial stability, the CBRT decided to
raise the upper band of the interest rate corridor and took
tightening measures through “extraordinary” and “ordinary”
day implementations. In this period, the CBRT mainly focused
on liquidity management and declared that it would continue
to keep monetary policy tight until inflation aligns with the
targets.
Investment grade awarded from a second credit rating
agency
The international credit rating agency Moody’s upgraded
Turkey’s credit rating by one notch from “Ba1” to “Baa3” in 2013.
Accordingly, Moody’s was the second credit rating agency after
Fitch to raise Turkey’s credit rating to investment grade.
The motivation behind Moody’s decision to upgrade the rating
was declared as the improvement in economic and public
finance indicators. Moody’s also foresaw that the implemented
structural reforms would reduce the vulnerability to capital
flows.
PPI
CPI
FC Basket (right axis)
J 12
J 13
F 12
F 13
M 12
M 13
A 12
A 13
M 12
M 13
J 12
J 13
J 12
J 13
A 12
A 13
S 12
S 13
O 12
O 13
N 12
N 13
D 12
D 13
0
2
4
6
10
12
8
-10
-5
0
5
15
20
10
*Currency basket (0.5*EUR + 0.5*USD) is calculated by using monthly average currency rates of CBRT.
Inflation and FC Basket (Monthly Annualized Changes) (%)
In brief
Budget discipline was
maintained, but inflation
exceeded the year-end target.
The CBRT started to take
tightening measures.
Moody’s upgraded Turkey’s
credit rating to investment
grade.
Activities
25
İşbank
Annual Report 2013
