Inflation in Turkey approached 80% in June, the highest since 1998, despite repeated promises by Turkish President Recep Tayyip Erdogan to curb price increases, less than 12 months before a presidential election announced as imminent.
This sharp rise in consumer prices, which were 78.6% in 12 months versus 73.5% in May, can largely be explained by the collapse of the Turkish lira, which lost almost half its value against the dollar in a year.
It has not reached such a level since President Erdogan came to power in 2003, and will stand for re-election in June 2023.
Inflation is a hot topic in Turkey and price increases are eroding households’ purchasing power week after week. Its calculation is also the subject of intense debate, with the opposition and many economists accusing the National Statistics Office (Tüik) of knowingly and largely underestimating its magnitude.
The Inflation Research Group (ENAG), made up of independent Turkish economists, said Monday morning that year-on-year inflation was actually 175.5%, more than double the official rate.
Less than a quarter of Turks say they trust official inflation figures, according to a Metropoll Institute poll released last week. “No one believes the (official) data in Turkey anymore,” commented Timothy Ash, an analyst at BlueAsset Management and Turkey specialist, on Monday.
President Erdogan himself has fueled this distrust by sacking four directors of the statistical institute since 2019.
The stakes are high: unprecedented inflation could hurt the re-election chances of the leader who has built his electoral successes over the past two decades on promises of prosperity. “This Tuïk lie amounts to stealing from the pockets of pensioners and civil servants. Stop committing crimes @RTErdogan you will be held accountable! railed on Twitter on Monday about the leader of Turkey’s main opposition party, Kemal Kilicdaroglu.
This inflation, which is even higher in the country’s big cities like Istanbul and reached 93.3% for food and 123% for transport in June, forced the government to announce a 25 percent increase in the minimum wage on Friday. But that hike, the second of the year after the 50% hike implemented on Jan. 1, could further accelerate consumer price inflation in the coming months by creating a price-wage loop in the absence of rising interest rates, experts warn.
48% of workers are paid the minimum wage, which is now 5,500 Turkish liras, or less than $330, according to Turkish Social Security data.
Despite steadily accelerating inflation and fears of further price hikes linked to the war in Ukraine, Turkey’s central bank continues to refuse to raise interest rates, which have been stable at 14% since December. Contrary to classic economic theories, President Erdogan believes that high interest rates promote inflation.
In power since 2003 as prime minister and then president, the head of state said at the end of April that inflation would slow “after the month of May”. At the beginning of June, the Turkish President declared that he wanted to lower interest rates again. “We don’t have an inflation problem, we have a cost of living problem,” he said.
On Friday, Turkey’s economy minister Nureddin Nebati indicated that inflation would only slow from December.
Inflation in Turkey approached 80% in June, the highest since 1998, despite repeated promises by Turkish President Recep Tayyip Erdogan to curb price increases less than 12 months before a presidential election announced as close, up from 73% over 12 months, 5% in May,…
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