Turkey says oil price under $65 will tame inflation

Turkey’s finance minister Mehmet Simsek said that if the oil price remains below $65 a barrel, it will lower year-end inflation by 1 to 1.6 points this year.

Responding to a Reuters question on the impact of a fall in oil prices following recent global trade measures, Simsek said persistent oil prices below $65 could also mean Turkey’s current account deficit stays below 1.5 percent of gross domestic product.

The central bank’s year-end inflation estimate currently stands at 24 percent, while according to the government’s medium-term programme the current account deficit-to-GDP ratio is projected to be 2 percent this year.

Oil prices retreated after a volatile session on Wednesday, as fears of a deepening US-China trade war and possible recession eclipsed earlier relief created by President Donald Trump’s announcement of a pause on higher tariffs against dozens of countries.

Analysts say the trade war between the US and China leaves significant uncertainty over oil demand growth with more risk to the downside for prices.

Speaking at an OECD event, Simsek also said there are some downside risks to Turkish economic growth and budget revenue performance after recent turbulence in the markets.

“But one thing we can assure you is that spending controls will be there, and so we’ll deliver on spending commitments. We will achieve the end result of bringing inflation down. That’s really the key message here,” he said.

Markets have been rocked since Trump announced his huge tariff plans last week. Analysts say the levies would be more restrictive than anticipated and likely to push the global economy into a recession.

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