Istanbul (The Times Groupe)- Annual inflation rate in Turkey has hit a 24-year high of 73.5% in May, fueled by the war in Ukraine, rising energy prices, and a tumbling lira — though the figure is lower than economists had predicted.
As the Turkish Lira slumped after the central bank launched a 500 basis-point easing cycle requested by President Tayyip Erdogan, inflation has surged since last autumn.
It is the highest since October 1998, when annual inflation was 76.6% and Turkey was fighting to end a decade of chronically high inflation. Nevertheless, the consensus forecast predicted annual inflation would rise to 76.65%.
According to the Turkish Statistical Institute (TUIK) on Friday, consumer prices rose by 2.98% month-over-month, compared with a prediction of 4.8% in a Reuters poll.
In the last year, food and transportation costs have risen by 108% and 92% respectively, reflecting a deepening economic crisis for Turks struggling to afford basic goods. May’s producer price index increased by 8.76% month-over-month for an annual increase of 132.16%.
Against the U.S. dollar, the Turkish Lira fell 0.25% to 16.5050, its weakest level since December. In 2021, the local currency dropped 44% and another 20% this year.
Finance Minister Nureddin Nebati said on Twitter that monthly inflation readings are trending lower in a positive sign despite the highest annual rate in Erdogan’s two decades in power.
Nebati has previously stated that inflation would fall to single digits by next year’s election under an economic programme that emphasizes low interest rates, high production and exports, and a current account surplus.
However, the trade deficit widened 157% year-over-year to $10.7 billion in May, largely as a result of energy imports. The central bank expects single digit inflation by 2024.
Based on a median estimate, economists see inflation remaining high for the rest of 2022 and ending the year at 63%, up from 52% last month.
“With the country’s current policies, it is impossible to resolve its key problem of high inflation,” said economist Arda Tunca, a columnist for PolitikYol.
Members of the opposition and economists have questioned TUIK’s figures, claims TUIK has dismissed. Turks believe inflation is higher than official figures indicate.
TUIK suddenly halted publishing the average prices of individual items in the inflation basket, which were listed in a monthly table since 2003.
To comply with Eurostat, the institute said it will publish an index table showing changes in item groups.
Mahfi Egilmez, another Turkey-based economist, said on Twitter that establishing TUIK’s structure independent from government is as important as the central bank’s independence. The first and foremost prerequisite for implementing correct policies is producing accurate and reliable data.