Inflation in Turkey worsens, figure reached 20 year high

Istanbul: Annual inflation in Turkey rose to 69.97% in April. It is above forecast as well as at a two-decade high. After the crash of the Turkish currency lira last year, rising energy and commodity prices and the Russia-Ukraine conflict have fueled inflation. The currency’s fall was triggered by a 500 basis points interest rate easing cycle, which began last September under pressure from Turkish President Tayyip Erdogan. This led to a steady rise in consumer prices. According to the Turkish Statistical Institute, month-on-month consumer prices increased by 7.25%.

The data showed that the increase in consumer prices was driven by a 105.9% jump in the transport sector, which includes energy prices. Apart from this, an increase of 89.1% was registered in the prices of food and non-alcoholic drinks. On a month-on-month basis, food and non-alcoholic drink prices increased by 13.38% and house prices increased by 7.43%.

what the government has to say
The government has said that inflation will fall due to its new economic program. The program gives priority to exports with the goal of achieving low interest rates and current account surplus to boost production. However, economists believe that inflation will remain high in the remaining 2022 due to the war. Inflation is expected to remain at 52% at the end of the year. The current account deficit has also increased sharply at the beginning of the year.

When was the last time inflation at this level?
The last time inflation in Turkey was at this level was in 2002. It was recorded at 73.1% in February that year. To reduce the burden on the household budget, the Turkish government is subsidizing some electricity bills and the tax burden on basic goods has also been reduced. Despite this, inflation continues to rise. Last week Turkey’s central bank projected that annual inflation would hit around 70% by June and fall to close to 43% by the end of the year. At the same time, by the end of 2024, it will come in single digit. The central bank has kept its key policy rate stable at 14% in four meetings this year and said the measures and policy steps will prioritize so-called ‘leerarisation’ in the market.