Turkey inflation spirals to 70%

Turkey’s official inflation rate spiralled to nearly 70 per cent in April, data showed on Thursday, posing a huge challenge to President Recep Tayyip Erdogan, whose unconventional economic policies are often blamed for the economic turmoil.

The consumer price index rose by 69.97 per cent year-on-year in April compared with 61.14 per cent in March, the national statistics agency said.

Erdogan insists that sharp cuts in interest rates are needed to bring down soaring consumer prices, flying in the face of economic orthodoxy.

The collapse of the lira has pushed up the cost of energy imports and foreign investors are now turning away from the once-promising emerging market.

Russia’s invasion of Ukraine and the coronavirus pandemic have exacerbated the energy price spikes and production bottlenecks.

Turkey’s annual inflation rate — the highest since Erdogan’s ruling AKP party rose to power in 2002, is largely linked to his unconventional economic thinking, analysts say.

Erdogan has put pressure on the nominally independent central bank to slash interest rates. In April, the bank kept its benchmark interest rate steady for the fourth consecutive month, bowing to the pressure despite high inflation.

The biggest price increases in April were for the transport sector, standing at 105.9 per cent, while the prices of food and non-alcoholic drinks jumped 89.1 per cent.

“True it’s about food and energy price increases but also the spectacular failure of monetary policy in Turkey,” Timothy Ash, emerging markets strategist at BlueBay Asset Management, said in a note to clients.

“Low interest rates cause inflation. Period. Fact. The reality,” he said, accusing Erdogan of “trying to re-write economics to say the opposite which is the economics equivalent of calling the earth flat.”

Treasury and Finance Minister Nureddin Nebati on Monday brushed aside concerns, saying that the current inflationary trend was fleeting and would “not spread over the long term and be permanent”.

“We will increase the welfare and purchasing power of our citizens over the past level,” he said.

At a bazaar in an Istanbul neighbourhood on the European side, shoppers vented their anger over soaring prices.

“People are starving! I feel ashamed when I am shopping,” Rita Ezel, a retired woman, told AFP.

“My monthly pension vanishes in 10 days.”

Another retiree, Seckin Gozuyasli, said: “The prices change on a weekly basis. Milk, cheese, meat, everything, detergent, everything you can imagine is so expensive now.”

She blamed the “wrong economic policies” as well as Turkey’s playing home to 3.6 million Syrians who fled the war back home for surging prices.

Turkey has cut taxes on some goods and offered subsidies for electricity bills for vulnerable households but even this has failed to stem inflation.

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