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Turkey hit with soaring prices as inflation nears 80%

·3-min read
<span>Photograph: Francisco Seco/AP</span>
Photograph: Francisco Seco/AP

Turkey’s official inflation rate increased to almost 80% last month – the highest in 24 years – as President Recep Tayyip Erdoğan’s unconventional economic policies continued to drive up the cost of living.

The growth in annual prices rose from 73.5% in May to 78.6% in June, according to the Turkish statistics agency.

However, opposition parties and economists said recent hikes in oil and gas prices meant the real rate of inflation was almost double the official figure.

The minister of treasury and finance, Nureddin Nebati, has attempted to head off criticism of the government’s handling of the economy, saying last week that consumer prices would start dropping by the end of the year.

“I promise to you and to the president, we will see a drop in inflation starting in December,” Nebati said.

His comments came after the government announced its second increase in the minimum wage in six months, raising pay by 30%. The increase lifted the monthly salary of about 40% of the workforce from $254 (£209) to $328.

Erdoğan has claimed that Turkey’s problem is not inflation. “We do not have an inflation problem. We have a cost of living problem,” he said last month.

Economists said Turkey’s official data disguised a more disturbing trend of rising prices that had shown no sign of abating.

A monthly report release by Turkey’s ENAG group of independent economists showed consumer prices had risen by 175% in June compared with a year earlier. ENAG said prices had risen by 71.4% since the start of 2022.

The Istanbul chamber of commerce said inflation in Turkey‘s largest city had reached an annual rate of 94%.

“No one actually believes official Turkish data any more,” said Timothy Ash, an economist at BlueBay Asset Management. “There is no expectation of anything like a credible policy response.”

The growing dispute over the veracity of Turkey’s official data is expected to be a difficult political issue for Erdoğan’s government ahead of next year’s general election, which is widely viewed as the toughest of his two-decade rule.

Related: Turkey’s war with inflation: ‘Prices change daily and everyone is scared’

Kemal Kılıçdaroğlu, the leader of the main opposition party, accused the state statistics agency of “lying”, urging it in a tweet to “stop committing crimes for the benefit of President Erdoğan.”

A survey published by the Metropol polling agency on Friday showed 69% of respondents believed the unofficial ENAG figure and just 24% the one reported by the government.

Turkey was hit hard by the fallout from the European debt crisis in 2012 and the threat of higher interest rates by the US Federal Reserve in 2013. Its currency tumble ever since. In 2013 the lira was worth 36p, compared with 4.9p on Monday.

To arrest the decline, in 2018 Erdoğan embarked on what he called a “new economic model”, which meant setting aside rising inflation and cutting interest rates to boost economic growth.

This was done against the advice of his central bank chief and caused the lira to plunge to a record low, pushing up costs in a country that is dependent on imported materials, especially energy.

Inflation, which officially stood at 15% at the beginning of 2021, has now reached its highest level since a currency meltdown during the 1998 debt crisis that helped bring Erdoğan to power.

Three central bank bosses have been fired by the president since 2018. The Turkish lira has plummeted 20% this year alone.

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