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 past eleven months, 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.
The currency has thus seen its value melt by 44% once morest the dollar in 2021, and has once more lost more than 11% once morest the greenback since January 1.
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.
“Embarrassing for Turkey”
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, following two decades as prime minister and then president.
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 following 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 beyond the 23.2% advanced until there.
“It becomes embarrassing for Turkey,” commented Timothy Ash, an analyst at BlueAsset Management and a specialist in Turkey. “Of course, 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, “there is no indication that the Central Bank of Turkey is regarding to raise its 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.
