Friday, January 28

Turkey: official inflation reaches new highs

The leader of the main opposition party CHP, Kemal Kilicdaroglu, on December 3, 2021 in Ankara, photographed by his press service ALP EREN KAYA

As a result of the collapse of the currency, inflation reached a new ceiling in three years in Turkey on Friday and officially exceeded 21% over one year, pushing the country even further into the doldrums.

This inflation at 21.31% (+1.5 point in one month), which makes the cost of living difficult to bear for many families, is more than four times higher than the government’s initial objective.

However, the opposition and several observers immediately questioned the reality of these official figures, accusing the National Statistics Office (Tuïk) of underestimating them.

“It is no longer a state institution but a dependency of the (presidential) Palace”, denounced the leader of the main opposition party – the CHP – Kemal Kilicdaroglu.

The rise in prices is largely explained by the fall of the Turkish lira, which has seen its value plunge by more than 45% against the dollar since the start of the year and by almost 30% since the end of October. which increases the cost of imports.

Late Friday morning (8:30 GMT), the exchange rate approached 13.87 Turkish liras to the dollar.

In October, inflation reached 19.89% year-on-year.

Turkish President Recep Tayyip Erdogan, who replaced the Minister of Finance with his deputy on Wednesday, again rejected any shift in his economic policy this week, which nevertheless arouses suspicion in the markets.

The head of state continues to advocate low interest rates, arguing against classic economic theories that high rates encourage prices to rise.

Faced with the prospect of further interest rate cuts which could occur this month, the rating agency Fitch Ratings announced on Friday that it had lowered Turkey’s sovereign debt outlook from stable to negative.

And to further tarnish Turkey’s image with investors, the Council of Europe, meeting in Strasbourg (France), announced on Friday the opening of a rare infringement procedure – which could lead to sanctions – against Ankara, which has kept the patron Osman Kavala in detention without trial for four years, despite an ECHR decision calling for his “immediate release” in December 2019.

In accordance with the president’s wish, the officially independent Turkish Central Bank lowered its key rate in November (from 16 to 15%) for the third time in less than two months, at the risk of further increasing inflation.

However, the Turkish Central Bank announced on Wednesday that it had intervened to stop the fall of the Turkish lira by selling part of its reserves in dollars. However, this measure did not succeed in stopping the slide of the currency.

– “Any sense” –

Turkey has experienced almost continuous double-digit inflation since early 2017. For some commodities like eggs, meat and oil, inflation is even higher.

Part of the opposition and economists on Friday questioned the figures of the National Statistics Office (Tüik), believing that real inflation is significantly higher.

“I asked for an appointment at Tüik, but they did not grant me. I will be there at 11:00 am (8:00 am GMT),” the CHP chief tweeted.

Promise kept: Images broadcast by 24-hour television channels showed Mr Kilicdaroglu and a member of his party on Friday morning in front of the closed gates of the Turkish Statistical Institute.

“We came to get the exact numbers,” he said in front of a crowd of microphones.

Even feigned astonishment on the part of some observers: “So the pound depreciates by 30% in one month and only 3.5% of price increase [en novembre] ? It doesn’t make sense to me, ”responded emerging market analyst Timothy Ash.

Before pressing: “I have serious doubts about the accuracy of the inflation data now.”

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