On Wednesday, The World Economic Situation and Prospects report was released. The UN report predicted that in Turkey, inflation would fall to an average of 42.4% by year’s end, a much higher figure than Turkey’s own governmental projections.

The new report casts even more doubt on Turkey’s assertions that it will be able to tackle its country’s high inflation rates by cutting interest rates to boost economic activity.

In 2021, Turkey began cutting interest rates to support economic growth, make its products more attractive to foreign countries, increase investments, and decrease unemployment. It was a counterintuitive strategy in a world where most economists assume inflation is best countered by higher interest rates which diminish demand, and thereby lower prices.

The policy initially triggered a crisis, as the national currency lost almost 30% of its value throughout 2022. Turkish inflation reached a 24 year high in October, at 85.5%, before dropping back to 64.3% in December.

The biggest increases in prices in Turkey for 2022 were seen in housing, which rose 79.83%, food and non-alcoholic beverages, which was up 77.87%, and transportation, which rose 54.45%.

Ankara’s official forecast calls for inflation to slow to 24.9% in 2023, before dropping to 13.8% in 2024, although most economists expect the decline in inflation to be more moderate than that.

However the interest rate cuts are stimulating growth in the Turkish economy, as the UN report predicts Turkey will see GDP rise by 3.7% this year, and by 3.5% in 2024.