Saturday, January 22

Inflation soars in Turkey, highest since 2002

Inflation reached 36.08% over one year in December in Turkey, a record since September 2002 due to the collapse of the Turkish lira which places President Recep Tayyip Erdogan in an uncomfortable position, eighteen months before the next election presidential.

This increase in consumer prices, more than seven times higher than the government’s initial target, is explained by the fall of nearly 45% of the Turkish lira against the dollar over one year, despite emergency measures announced. by the Head of State in mid-December.

Inflation has become a hot topic in Turkey: the opposition and part of the population accuse the National Statistics Office (Tüik) of knowingly and largely underestimating the rise in prices, fueled by President Erdogan’s monetary policy which has prompted the Turkish central bank to systematically lower its interest rates in recent months.

Contrary to classic economic theories, the head of state believes that high interest rates promote inflation, but his monetary policy – and the lack of independence of the central bank, from which Mr. Erdogan has dismissed three governors since 2019 – have only dragged the national currency down.

In power since 2003, Mr. Erdogan refuses any change in his economic policy on which his success has long been based. Regularly re-elected, Mr. Erdogan seems to bet on growth at all costs, which reached 7.4% over one year in the third quarter, driven in particular by exports made less expensive.

But for the Turks, the collapse of the currency translates into a surge in prices which has become difficult to sustain, the country being very dependent on imports, especially for raw materials and energy.

– + 86% for flour and chicken –

Inflation is therefore evident in supermarkets, where labels keep being reprinted: food prices have increased by 43.8% over one year despite threats from the government, which has urged major supermarket chains to review their prices down in recent weeks.

According to official figures, flour and chicken meat have seen their prices increase by 86% in one year, sunflower oil by 76% and bread by 54%. Endless queues have appeared in recent weeks in front of bread kiosks run by opposition municipalities in Istanbul and Ankara, where bread is sold at half the price of most bakeries.

In this politically explosive context, President Erdogan raised the minimum wage on January 1 from 2,825.90 to 4,253.40 pounds (around 275 euros), an increase of 50% largely erased by the economy.

“I fear that all wage increases have melted in two months,” reacted Monday on Twitter Gizem Öztok Altinsaç, chief economist of the Turkish employers’ organization Tüsiad.

After several weeks of historic losses, the Turkish lira had nevertheless recovered in mid-December following the emergency measures announced by President Erdogan and massive sales of dollar reserves, but the currency is once again seeing its value melt. for a week against the greenback.

One dollar was trading against 13.66 Turkish lira late Monday morning (8:30 GMT). One dollar was worth 7.4 pounds at the start of January 2021; then 8.3 pounds at the beginning of September and 9.6 pounds at the beginning of November.

At the end of December, the monetary crisis turned to political settling of accounts in Turkey, with a call from the new Minister of Finance to file a complaint against economists and journalists who commented on the collapse of the national currency.

In addition to the governors of the central bank, the head of state has also replaced his Minister of Finance three times since 2018, the last of which, on December 2, in the midst of a debacle.

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