Record inflation in Turkey is explained by the collapse of the Turkish lira against the dollar (AFP / Archives / Ozan KOSE)
Inflation soared to 36.08% over one year in December in Turkey, a record since September 2002 due to the collapse of the Turkish lira but President Recep Tayyip Erdogan, in an uncomfortable position eighteen months from the presidential election, continues to defend its choices.
The rise in consumer prices, more than seven times higher than the government’s initial target, to 13.58% in December alone, can be explained by the fall of nearly 45% of the Turkish lira against the dollar in one year, despite emergency measures announced by the Head of State in mid-December.
Aware of the damage caused not only to the economy but also to its confidence rating, Mr. Erdogan promised early in the evening, after the government meeting, to “bring inflation down to a number as quickly as possible”.
Because these figures are the subject of a bitter political battle: the opposition and part of the population accuse the National Statistics Office (Tüik) of knowingly underestimating the rise in prices, fueled by the president’s economic policy. which has prompted the Turkish central bank to systematically lower its interest rates in recent months.
President Recep Tayyip Erdogan, speaking to Turkey’s Grand National Assembly in Ankara on December 22, 2021 (AFP / Archives / Adem ALTAN)
Contrary to classic economic theories, Mr. Erdogan believes that high interest rates promote inflation, but his monetary policy – and the lack of independence of the central bank, from which Mr. Erdogan has sacked three governors since 2019 – have only dragged the national currency into its fall.
– “record” exports –
In power since 2003, Mr. Erdogan refuses any change in his economic policy, on which his success has long been based, and seems to be betting everything on growth, which reached 7.4% over one year in the third quarter.
This is driven in particular by exports made less expensive, up 32.9% over one year to 225.37 billion dollars, “a record”, welcomed Monday the Turkish president praising these good results.
To support the currency against the greenback, the authorities on Monday called on exporters to return 25% of the amount of their exports in euros, dollars or pounds sterling, to the Monetary Authority of Turkey.
After several weeks of historic losses, the Turkish lira recovered in mid-December after the announcement of emergency measures by the Head of State and massive sales of dollar reserves, before falling again.
It took around 13 Turkish Lira to get a dollar on Monday – compared to 7.4 pounds in early January 2021 and 9.6 pounds in early November.
For households, the collapse of the currency translates into ever higher bills, the country being very dependent on imports, especially for raw materials and energy.
Inflation is obvious in supermarkets: Food prices have climbed 43.8% year on year despite threats from the government, which has urged major supermarket chains to revise their prices down in recent weeks.
– + 86% for flour and chicken –
In front of a bread kiosk managed by the municipality of Istanbul, December 18, 2021 (AFP / Archives / Yasin AKGUL)
According to official figures, flour and chicken meat increased by 86% in one year, sunflower oil by 76% and bread by 54%.
Endless queues have appeared in recent weeks in front of bread kiosks run by opposition municipalities in Istanbul and Ankara, where bread is sold at half the price of most bakeries.
In this politically explosive context, President Erdogan raised the minimum wage on January 1 from 2,825.90 to 4,253.40 pounds (around 275 euros), an increase of 50% already partly erased by the economy.
“I fear that all wage increases have melted in two months,” however tempered on Twitter Gizem Öztok Altinsaç, chief economist of the Turkish employers’ organization Tüsiad.
Demonstration against the Turkish government’s economic measures in Ankara, December 19, 2021 (AFP / Archives / Adem ALTAN)
“Absolutely terrible inflation figures for Turkey in December (…). The result of disastrous economic policies”, commented economist Timothy Ash, specialist in Turkey at the firm BlueBay Asset Management, for whom the country is doing now faced with “an inflation / devaluation spiral of the Argentina / Venezuela type”.
In addition to the waltz of the governors of the central bank, the Head of State has also replaced his Minister of Finance three times since 2018, the last of which, on December 2, in the midst of a debacle.
© 2022 AFP
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