BofA forecasts soaring 78% peak inflation rate in Turkey by May 2024

In its latest report on the Turkish economy, Bank of America (BofA) has forecasted a tumultuous period of soaring inflation rates reaching a peak of 78% in May 2024, followed by a tapering to around 40% by the end of that year. The bank also envisions the US dollar stabilizing at 31 Turkish Lira by the end of 2023, marking a 15% increase from previous figures.
In their detailed report, BofA highlighted that the inflation rate for 2023 is expected to hover around 70%. As the Turkish economy grapples with escalating inflation rates, significant fluctuations in the policy interest rates are also anticipated. The policy interest rate, currently projected to rise to 30% by the end of 2023, is expected to further escalate to a staggering 45% after the local elections in March 2024.
According to the data disseminated by Bloomberght, commercial lending rates are projected to reach a threshold of 50%, with retail sector interest rates anticipated to climb even higher post the 2024 local elections.
Banking Sector Recommendations and Target Prices Updated
In the wake of these projections, BofA has revised its recommendations and target prices for several prominent banks in Turkey. Notable updates include an upgrade in the recommendation for Yapı Kredi to 'Buy', and a neutral rating assigned to Akbank.
Following are the revised target prices as per the recent update:
• Garanti BBVA: Revised from 32.4 TL to 70.7 TL
• Akbank: Adjusted from 16.7 TL to 38.6 TL
• Yapı Kredi: Increased from 10.9 TL to 23.95 TL
• İşbank: Elevated from 11.8 TL to 26.15 TL
• Halkbank: Updated from 5.35 TL to 10.70 TL
• Vakıfbank: Lifted from 8.65 TL to 14 TL
The BofA emphasized that these revised figures and recommendations reflect the projected economic trends and policy changes that are expected to influence the banking sector and the broader financial landscape in Turkey over the coming years.
Financial experts and investors are closely monitoring the evolving economic landscape in Turkey, with a keen eye on policy interest rates and inflation trends, as they prepare to navigate a period of significant economic flux.