Inflation rose to almost 70% yoy in Turkey in April, weighing on budgets and President Recep Tayyip Erdogan’s re-election chances (AFP/Adem ALTAN)
Inflation rose to nearly 70% year-on-year in Turkey in April, weighing on budgets and President Recep Tayyip Erdogan’s chances of re-election in 2023.
Government promises and VAT cuts announced earlier this year, especially on basic necessities, have had no effect: prices continued to rise by 7.25% in April, in the middle of Ramadan, reaching 69.97%, the highest inflation rate since February 2002.
The rise in consumer prices, which has continued over the past 11 months, is becoming unsustainable: it had already topped 61% yoy in March, on the back of the collapse of the Turkish lira and soaring energy prices. .
Despite fears of fresh price hikes linked to the war between Ukraine and Russia, from which Turkey imports energy and grain, the Turkish central bank has yet to hike interest rates, which have been stable at 14% since late 2021.
President Recep Tayyip Erdogan, who, contrary to conventional economic theory, believes that high interest rates encourage inflation, had forced the institution to cut its benchmark interest rate from 19% to 14% between September and December, causing the pound to fall.
– “I am ashamed!” –
At the large vegetable market in Bomonti, a residential area of Istanbul, shoppers are admitting their anger.
“People are hungry! I feel ashamed when I go shopping,” adds Rita Ezel, a pensioner. “ON the 10th of the month my pension has already melted”.
“We are in a desperate situation,” said Seckin Gozuyasli, a 50-year-old, who denounced “government policies and the Syrians,” alluding to the 3.6 million Syrian refugees housed in the country.
Fifteen months ahead of the presidential elections scheduled for June 2023, inflation is at the center of debates in Turkey. The opposition accuses the National Statistics Office (Tüik) of knowingly underestimating their extent.
A discrepancy that doesn’t go unnoticed by Yuksel Cinar, a salad vendor, who grumbles as he tidies up his stall.
“I’ve been working here for 35 years. Four of us work from home and we can barely bring in the bread. Those inflation rates… I wonder how they calculate them… You should come here, see how that happens “.
Independent Turkish economists from the Inflation Research Group (Enag) said Thursday morning that year-on-year inflation had actually reached 156.86%, more than double the official rate.
Despite polls predicting close elections, Erdoğan is hoping for re-election in 2023, after two decades as prime minister and then president.
– “Embarrassing for Turkey” –
The head of state, who promised in January to bring inflation back into single digits “as soon as possible”, assured last week that it “will slow down after the month of May”.
However, sustained hyperinflation would risk damaging the popularity of the president, who has built his electoral successes over the past two decades on promises of prosperity.
The Turkish central bank also had to revise its inflation forecast for the end of the year upwards last week and estimates it at 42.8% – well above the 23.2% previously forecast.
“It’s getting embarrassing for Turkey,” commented Timothy Ash, analyst at BlueAsset Management and specialist in Turkey. “Sure there is an increase in food and energy prices, but there is also the spectacular failure of Turkey’s monetary policy.”
For Jason Tuvey from the London-based company Capital Economics, inflation is likely to continue to rise in the coming months, “there is nothing to suggest it[ant] that the Central Bank of Turkey is about to raise interest rates”.
Turkey has experienced near-constant double-digit inflation since early 2017, but had never experienced such a rise in consumer prices since President Erdogan’s Justice and Development Party (AKP) came to power in late 2002.