Turkey Has Abandoned the Struggle to Tame Inflation

In my opinion, rather than expressing this economic policy with fancy sentences, the fact that the government is honest with its citizens about what we are facing works in the citizens’ favour.

What I have written so far may sound confusing. On the one hand, the government is trying to reduce inflation, on the other, it is trying to increase exports, and on the other hand again, it has growth targets, etc.

It is trying to do all of these things in contradiction to the basic rules of the economy.

As is well known, interest rates are one of the biggest obsessions of President Erdogan. At a press conference in January, Nebati expressed this. “You will talk about the independence of the Central Bank, there is no such thing,” he said. “Interest rates will no longer increase, forget it.”

Afterward, he stated again that Turkey would no longer use this most effective tool in the battle against inflation.

This all highlights how inconsistent Turkey’s economic policies are. It must be said here: Turkey cannot reduce inflation and increase the welfare of people with either these economic policies or actors.

Let’s look at the inflation data, and explain the situation in Turkey in terms of price stability.

In May, Turkey’s Consumer Price Index, CPI, was 73.5 per cent higher compared to the same month last year. The biggest increase in consumer prices was in the field of transport  – 107 per cent.

The rapid rise in oil prices in the world, and the depreciation of the Turkish lira, were factors in this increase. The annual increase in food prices was 91 per cent.

These two price groups played an important role in the rise of inflation. But while the CPI plays an important role for many citizens, it is necessary also to take a look at the Producer Price Index to understand future inflation trends.