Turkey cannot get inflation under control
The inflation rate in Turkey is once again rising massively. Compared to the same month last year, prices have almost doubled in some sectors of the economy. There are already signs of a new surge in inflation.
Inflation in Turkey continued to rise at the end of last year. In December, consumer prices rose by 64.77 percent year-on-year, according to the national statistics office in Ankara. The inflation rate has thus risen for the second month in a row and reached its highest level in just over a year.
After reaching levels of over 80 percent in 2022, inflation in Turkey fell noticeably over the course of last year. Inflation rates of below 40 percent were reached at times before inflation started to rise again since last summer.
The weakness of the national currency, the lira, is also contributing to this: It depreciated by 37 percent against the dollar in the past year alone, making imports more expensive. The central bank raised its key interest rate from 8.50 percent to 42.50 percent in 2023 in order to curb high inflation - with little success so far.
In the individual sectors of the Turkish economy, the strongest price increases were seen in the catering sector. Here, prices almost doubled year-on-year in December. In contrast, prices for clothing and electricity rose by around 40% year-on-year, which is less than the average. In addition, the rise in producer prices was significantly lower than the general price increase.
Turkish minimum wage to rise massively
According to experts, a new wave of inflation is looming following an unexpectedly sharp increase in the minimum wage at the start of the year. "Prices will rise by at least 25 to 30 percent," said Berke Icten, chairman of the Turkish Shoe Manufacturers Association. Labor Minister Vedat Isikhan had announced that the monthly minimum wage would rise to 17,002 lira (519 euros) in the new year. This corresponds to an increase of 49 percent compared to the level set in July.
Measured against January 2023, it is even a doubling. Around seven million Turks will benefit from the higher wage floor. Due to high inflation and the weakness of the lira, the government has raised the minimum wage every six months over the past two years. Employers are receiving support to mitigate the consequences.
However, this is less than expected, according to business associations. The increase will have a "significant impact on inflation", said an economist who wished to remain anonymous. The inflation rate could reach around 70 percent in the first half of 2024. Despite the substantial increase, the minimum wage would therefore fall in inflation-adjusted terms if there is no further increase in the middle of the year.
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The recent increase in the minimum wage in Turkey, from 17,002 lira to 17,002 lira (Eq. 519 euros), which is a doubling compared to January 2023, is expected to further fuel inflation in the country. The central bank's efforts to curb inflation through interest rate hikes have had little success, as the Turkish lira's depreciation against the dollar by 37 percent in a year makes imports more expensive, contributing to the rising prices.
Source: www.ntv.de
