Turkey’s inflation has risen to 73% as food and energy spending skyrocketed

Turkey’s inflation for May rose to 73.5% year-on-year, the highest in 23 years, as the country struggles with rising food and energy spending and President Recep Tayyip Erdogan’s long-standing strategy in monetary policy.

In 84 million countries, food prices have risen by 91.6% year-on-year, according to the country’s statistics agency. The supply chain problems, rising energy costs and Russia’s war in Ukraine have sharpened the pain that regular consumers face as they contribute to global inflation.

Turkey has been experiencing rapid growth for many years, but Erdogan has for years described himself as a fierce adversary to interest rates, refusing to raise rates meaningfully to reduce the resulting inflation.. As a result, the Turkish lira fell and the average Turkish was less likely to spend.

Erdogan advised the country’s central bank – which analysts say is not independent of itself – to cut lending rates again despite rising inflation over the past year. Central bank chiefs who opposed the move were fired; In the spring of 2021, the Central Bank of Turkey saw four different governors in two years.

The Turkish president has promised to present a new economic model that will help boost export wealth thanks to the cheaper lira and then tackle inflation by freeing Turkey from its long-standing trade deficit. That did not happen, and now the high costs of energy imports to be paid in dollars – many more dollars, thanks to the weakness of the lira – are putting severe pressure on the economy.

Economists expect Turkey’s path to inflation to worsen.

“Laser focus on heterotox actions on conventional monetary policy will not solve the inflation challenge and we expect it to exceed 80% y / y in Q3-22,” said Ehsan Koman, director of emerging market research for Europe, the Middle East and Africa. MUFG Bank wrote on Twitter following the release of the figures.

Speaking to CNBC, Koman said he expects Turkish inflation to remain “70% north of y / y until November”. This is because of higher commodity prices, rising costs of domestic production and the fall of the lira.

“Turkey in the era of inflation in the 1990s. Erdogan seems to have lost his last economic credibility,” Holger Schofitz, finance editor of the German daily Die Welt, wrote on Twitter. “Erdogan’s unusual strategy of managing the country’s $ 790 billion economy continues to backfire,” he wrote in another tweet.

Turkey’s consumer price index rose 73.5% to 70% from the previous month.