Inflation now sits at 73% in Turkey
Food and energy costs skyrocket
Turkey continues to have an agreesive inflation as May saw inflation reach levels of 72.5% YOY. This is the highest figure Turkey has seen in 23 years with President Recep Tayyip Erdogan’s unorthodox monetary policy strategy continuing to be in the way.
Food prices in Turkey rose a ridiculous 91.6% YOY after Turkey has enjoyed such solid growth for the years prior. The plummeting of the Turkish currency is in part to Erdogan never wanting to raise rates in an attempt to cool inflation.
Erdogran has instructed central banks in the country to slash borrowing rates throughout all of last year. This is during the time in which inflation saw its most gains. Heads of the Central Bank expression opposition and were then fired. Four different governors had been in charge by the spring of 2021.
A new economic model has been promised that would bring a boom in export wealth. The longtime trade deficit of Turkey has been on the chopping block but nothing has yet happened. Energy imports are needing to be paid in dollars and is now adding massive amounts of pressure on the economy.
“The laser focus on heterodox measures over conventional monetary policy will unlikely solve the inflation challenge and we anticipate levels breaching 80% y/y in Q3-22.
Turkey’s inflation will stay north of 70% y/y until November owing to a confluence of elevated commodity prices, rising domestic production costs and a precipitously depreciating lira.”
Ehsan Khoman, director of emerging markets research for Europe, the Middle East and Africa at MUFG Bank, said.
Economic analysts expect the trajectory for Turkey’s inflation will only get worse.
“Turkey back in the inflation age of the 1990s. Looks as if Erdogan has lost his last econ credibility. Erdogan’s unorthodox strategy for managing the country’s $790bn econ continued to backfire.”
Holger Zschapitz, finance editor at German daily Die Welt, wrote.
The 73.5% figure for Turkey’s consumer price index is up from 70% the month before.