In Turkey, consumer prices have recently risen sharply again – and the trend continues to rise. The president has a large share in the inflation misery.
Munich – Die Türkiye has long been struggling with a massive inflation problem. After the inflation rate reached its 24-year high of 85 percent in October 2022, it fell to below 40 percent over the past year. But it has increased again since the summer, also due to various tax increases. At the end of 2023, it was almost 65 percent year-on-year – and the trend continues to rise. Experts expect a new wave of inflation.
Inflation in Turkey is rising sharply again
According to the Turkish statistics office, the areas most affected by the inflation were food (plus 72 percent), transport (77.1 percent), health (79.6 percent) and education (82 percent). In the catering industry, prices almost doubled in December year-on-year. Unofficial estimates from However, experts assume that inflation will be significantly higher as officially reported.
As The reason for the inflation is the unexpectedly large increase in the minimum wage viewed. Labor Minister Vedat Isikhan had announced that the monthly minimum wage would be raised to the equivalent of 519 euros in 2024. This represents an increase of 49 percent compared to the level set in July.
Economist expects minimum wage increase to have “significant impact” on consumer prices
If you take January 2023 as the comparison month, the minimum wage will even double. The new increase will have a “significant impact on inflation,” an economist who wished to remain anonymous told Reuters. The inflation rate could reach around 70 percent in the first half of 2024.
In Turkey, the minimum wage usually only changes once a year. But two years ago the government changed its president Recep Tayyip Erdogan the habit. Because of high inflation and the weakness of the local currency, the lira – last year alone it depreciated by 37 percent against the dollar – the minimum wage was from now on adjusted every six months.
Erdogan fueled inflation in Turkey through “no interest policy”.
This in turn has a negative impact on consumer prices. “Prices will increase by at least 25 to 30 percent,” the head of the Turkish Shoe Manufacturers Association, Berke Icten, told Reuters. Although employers are receiving support from the government to mitigate the impact of higher wage costs, as usual
costs are being passed on to consumers. According to Icten, retail prices will increase.
That the Inflation in Turkey has even reached such levels, is also due to Erdogan's policies. For a long time, contrary to the recommendations of economists, he pushed through low key interest rates at the only formally independent central bank, even though inflation was already rising. Anyone who didn't want to go along was fired.
After being re-elected, Erdogan suddenly tightens the interest rate reins
Only after his re-election in the middle of last year did Erdogan move away from his “no interest policy”. After he appointed the former Wall Street banker Hafize Gaye Erkan, who cannot afford the high rents in Istanbul, as head of the central bank and the liberal economist Mehmet Simsek as finance minister, the monetary policy course changed: the key interest rates were increased in several steps , the rate is now 42.5 percent.
The central bank wanted to end the “cycle” of interest rate increases as soon as possible, it was said at the end of December. However, the strict monetary policy will be maintained until price stability is guaranteed. Interest rate increases take full effect after 18 months at the latest. Until then Turks have to endure high consumer prices. (mt)
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