A man sells slippers to Eminonu on May 5, 2022 in Istanbul, Turkey. The country has been growing rapidly for years, but President Erdogan has refused for years to significantly raise rates to cool the resulting inflation. The result has been a plummeting Turkish lira, much less purchasing power for the average Turk.
Burak Kara | Getty Images News | Getty Images
Turkey’s inflation in May rose by 73.5% year-on-year, its 23-year high as the country struggles with rising food and energy costs and its long unorthodox strategy. President Recep Tayyip Erdogan on monetary policy.
Food prices in the country of 84 million rose by 91.6% year-on-year, the country’s statistics agency reported, which clearly shows the pain suffered by regular consumers as supply chain problems , rising energy costs and the Russian war in Ukraine fuel global inflation.
Turkey has been growing rapidly for years, but Erdogan has refused for years to significantly raise rates to cool the resulting inflation, describing himself as a sworn enemy of interest rates. The result has been a plummeting Turkish lira, much less purchasing power for the average Turk.
Erdogan instructed the country’s central bank, which analysts say is not independent of him, to repeatedly reduce debt rates last year, although inflation continued to rise. The heads of the central banks who expressed their opposition to this line of action were fired; in the spring of 2021, the central bank of Turkey had seen four different governors in two years.
Turkish Lira and US Dollar
Result Kaboglu | NurPhoto via Getty Images
The Turkish president pledged to offer a new economic model that would lead to a boom in export wealth thanks to a cheaper lira, and then deal with inflation by eliminating Turkey’s trade deficit for a long time. This has not happened, and now the very high costs of energy imports that have to be paid in dollars — many more dollars, thanks to the weakness of the lira — are putting intense pressure on the economy.
Economic analysts expect Turkey’s inflation trajectory to only get worse.
“The laser focus on heterodox measures on conventional monetary policy is unlikely to meet the challenge of inflation, and we expect levels to exceed 80% annually in the third quarter of the 22nd,” said Ehsan Khoman, director of emerging market research. for Europe, the Middle East and Africa. MUFG Bank, wrote on Twitter after the publication of the figures.
Speaking to CNBC, Khoman added that he expects Turkey’s inflation to “remain north of 70% y / y until November due to a confluence of high commodity prices, rising production costs and a lira in hasty depreciation “.
“Turkey in the inflation era of the 1990s. It seems as if Erdogan has lost his last economic credibility,” Holger Zschapitz, financial editor of the German newspaper Die Welt, wrote on Twitter. “Erdogan’s unorthodox strategy to manage the country’s $ 790 billion economy continued to be counterproductive,” he wrote in another tweet.
The figure of 73.5% of the Turkish consumer price index is higher than 70% of the previous month.