Turkish inflation was much lower in December than in previous months. But living in the country still became almost two-thirds more expensive that month than it did at the end of 2021. The official inflation rate was 64.3%.
By November, the sharp increases in inflation in Turkey had already ended. It peaked at 85.5% in October from a year earlier. In November, however, prices still increased by 84.4%.
According to the BNR’s internal economist, Han de Jong, it is an exaggeration to call this an “Erdogan success”, noting that Turkish inflation in 2021 was below twenty percent for most of the year. “Over the course of 2022, inflation has actually reached 85%, so calling the drop at 64% – which is still terribly high – is a big hit that is going a little too far.”
But, De Jong admits, he expected worse. ‘I would have thought that an economy faced with such inflation would have developed much worse than the Turkish economy is doing now. Because growth is slowing, manufacturing is slowing and youth unemployment is rising, but this is not a recession. And with these inflation figures, I was expecting a worse picture.’
The decline in inflation is partly due to the fact that prices have already skyrocketed in late 2021. At that time, annual inflation was already 36%. Also, energy prices fell in December, so they had a smaller share in monetary inflation. This has also resulted in lower inflation in many European countries.
Unorthodox
Turkey has long pursued an unorthodox monetary policy. As inflation rose, the central bank repeatedly cut interest rates at the urging of President Recep Tayyip Erdogan. He wants to use it to boost production growth. At the same time, however, the lira depreciated against the dollar, which made energy imports expensive.
Although the figures have been released by the Turkish government, De Jong sees no reason to doubt the figures. Obviously people are not crazy. If inflation is much higher than the government says, then the loss of purchasing power is greater and the economy would probably also go into recession,” he says. “But we must not forget that this year is an election year and that a new parliament and a new president will be elected in mid-June.”
And according to De Jong, opinion polls indicate that Erdogan will have a hard time. ‘In the first round he will receive by far the most votes, but he will lose in the second round. So he has to do something.’ De Jong thinks Erdogan may be able to cheat the inflation data to score that victory. “If you want to take on evil, it’s possible,” he concludes. “But in recent days he has taken egregious actions, such as doubling the minimum wage and implementing changes to the pension scheme. And the consequence of the latter is that more than two million people could suddenly retire immediately, and this is very similar to getting votes.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
