Turkey: Inflation approaches 70%, a stone in Erdogan’s shoes – 05/05/2022 at 17:11

Turkey’s inflation rate rose to nearly 70% year-on-year in April, affecting households and President Recep Tayyip Erdogan’s re-election chances (AFP/Adem ALTAN)

Turkey’s inflation rate soared to nearly 70% year-on-year in April, affecting households and President Recep Tayyip Erdogan’s chances of re-election in 2023.

Government promises and value-added tax cuts announced at the beginning of the year on basic necessities in particular did nothing: Prices continued to rise by 7.25% in April, the middle of Ramadan, and inflation peaked at 69.97%, the highest level since February 2002.

The rise in consumer prices, which has persisted over the past eleven months, has become unsustainable: it already exceeded 61% in March year on year, as a result of the collapse of the Turkish lira and the rise in energy prices.

Despite fears of new price increases linked to the war between Ukraine and Russia, where Turkey imports energy and grain, the Turkish Central Bank has not yet raised interest rates, which have been stable at 14% since the end of 2021.

President Recep Tayyip Erdogan, who, contrary to traditional economic theories, believes that high interest rates foster inflation, forced the institution to cut the key interest rate from 19% to 14% between September and December, sending the pound lower.

– “I’m ashamed!” –

At the large vegetable market in Bomonti, a residential district of Istanbul, shoppers admit their anger.

“People are hungry! I feel ashamed when I go shopping,” adds Rita Eisel, who is retired. “On the 10th of the month, my pension has already melted.”

“We are in a desperate situation,” said Seken Gozuyasli, a 50-year-old accusing the “politics of the government and Syrians,” referring to the 3.6 million Syrian refugees the country hosts.

Inflation is at the center of discussions in Turkey, fifteen months before the presidential elections scheduled for June 2023, the opposition accused the National Statistical Office (Tüik) of intentionally underestimating its size.

A contradiction that Yuksel Cinar, a salad seller, grumbles about as he arranges his booth.

“Je travaille ici depuis 35 ans. On est quatre à travailler à la maison et on arrive à peine à rapporter le pain. Ces taux d’inflation.. je me demande comment ils calculent… Ils devraient venir ici, voir” this happens”.

Independent Turkish economists from the Inflation Research Group (Enag) said Thursday morning that inflation had already reached 156.86% year-on-year, more than double the official rate.

Despite opinion polls predicting a tough election, Erdogan hopes to be reappointed in 2023, after two decades as prime minister and then president.

– ‘Embarrassing for Turkey’ –

The head of state, who promised last January to return inflation to single digits “as soon as possible”, confirmed last week that “it will start to slow down after May.”

However, continued hyperinflation would damage the popularity of the president, who has built his electoral successes over the past two decades on his promises of prosperity.

La Banque centrale turque a elle aussi dû revoir la semaine passée à la hausse ses prévisions d’inflation pour la fin de l’année, estimant qu’elle se situerait à 42,8% – bien au-delà des 23,2% avancés Even here.

“It has become an embarrassment for Turkey,” commented Timothy Ash, an analyst at BlueAsset Management who specializes in Turkey. “Certainly there is a rise in food and energy prices, but it is also a fiasco of Turkish monetary policy.”

For Jason Tuvey, of Capital Economics in London, inflation should continue to rise in the coming months, “Nothing indicates[ant] Turkey’s central bank is about to raise interest rates.”

Turkey has seen near-constant double-digit inflation since early 2017, but has not seen such a rise in consumer prices since President Erdogan’s Justice and Development Party (AKP) took power in late 2002.

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