Turkey: inflation is close to 70%, stone in Erdogan’s shoe – 05/05/2022 at 17:11

Turkey: inflation is close to 70%, stone in Erdogan's shoe - 05/05/2022 at 17:11

Inflation soared in Turkey to nearly 70% year on year in April, weighing on households and President Recep Tayyip Erdogan’s re-election chances (AFP/Adem ALTAN)

Inflation soared in Turkey to nearly 70% year on year in April, weighing on households and President Recep Tayyip Erdogan’s chances of re-election in 2023.

The government’s promises and the VAT cuts announced at the start of the year on basic necessities in particular did nothing: prices continued to rise by 7.25% in April, in the middle of Ramadan, culminating inflation at 69.97%, the highest since February 2002.

The rise in consumer prices, which has continued over the last eleven months, is becoming unsustainable: it had already exceeded 61% in March year-on-year, a consequence of the collapse of the Turkish lira and the surge in energy prices. .

Despite fears of new price increases linked to the war between Ukraine and Russia, from where Turkey imports energy and cereals, the Turkish Central Bank has not yet raised its interest rates, stable at 14% since the end of 2021.

President Recep Tayyip Erdogan, who believes contrary to conventional economic theories that high interest rates promote inflation, had forced the institution to lower its key rate from 19% to 14% between September and December, leading to a fall of the pound.

– “I am ashamed!” –

On the large vegetable market in Bomonti, a residential district of Istanbul, shoppers confess their anger.

“People are hungry! I’m ashamed when I go shopping,” adds Rita Ezel, retired. “ON the 10th of the month, my pension has already melted”.

“We are in a desperate situation,” loose Seckin Gozuyasli, a fifty-year-old who accuses “government policy and the Syrians”, alluding to the 3.6 million Syrian refugees hosted in the country.

Inflation is at the heart of the debates in Turkey, fifteen months before the presidential election scheduled for June 2023, the opposition accusing the National Statistics Office (Tüik) of knowingly underestimating its magnitude.

A discrepancy that does not escape Yuksel Cinar, a salad seller who grumbles as he tidies up his stall.

“I’ve worked here for 35 years. Four of us work from home and we can barely bring in the bread. These inflation rates.. I wonder how they calculate them… They should come here, see how that happens”.

Independent Turkish economists from the Inflation Research Group (Enag) said on Thursday morning that inflation actually reached 156.86% year on year, more than twice the official rate.

Despite polls predicting a tight election, Erdogan hopes to be reappointed in 2023, after two decades as prime minister and then president.

– “Embarrassing for Turkey” –

The head of state, who had promised in January to bring inflation back to single digits “as quickly as possible”, assured last week that it “will start to slow down after the month of May”.

Sustained hyperinflation, however, would risk damaging the popularity of the president, who has built his electoral successes of the past two decades on his promises of prosperity.

The Turkish Central Bank also had to revise its inflation forecast for the end of the year upwards last week, estimating that it would stand at 42.8% – well above the 23.2% forecast. until there.

“It becomes embarrassing for Turkey,” commented Timothy Ash, an analyst at BlueAsset Management and a specialist in Turkey. “Certainly there is a rise in food and energy prices, but it is also the spectacular failure of Turkish monetary policy.”

For Jason Tuvey, of the London firm Capital Economics, inflation should continue to rise in the coming months, “nothing indicates[ant] that the Central Bank of Turkey is about to raise interest rates”.

Turkey has seen near-constant double-digit inflation since early 2017, but had never seen such a spike in consumer prices since President Erdogan’s Justice and Development Party (AKP) came to power in late 2002.