Turkey’s official inflation rate surged to nearly 80% last month – the highest in 24 years – as President Recep Tayyip Erdogan’s unconventional economic policies continued to raise the cost of living.
Annual price growth rose from 73.5 percent in May to 78.6 percent in June, according to the Turkish Statistics Agency.
However, opposition parties and economists said recent increases in oil and gas prices meant the real rate of inflation was almost double the official figure.
Treasury and Finance Minister Noureddine Nebati sought to fend off criticism of the government’s handling of the economy, saying last week that consumer prices would begin to fall by the end of the year.
“I promise you and the president that we will see a decline in inflation from December,” Nebati said.
His comments came after the government announced its second increase in the minimum wage in six months, boosting wages by 30%. The increase lifted the monthly pay of about 40% of the workforce from $254 (£209) to $328.
Inflation rate in Turkey Photo: Refinitiv
Erdogan claims that Turkey’s problem is not inflation. “We don’t have a problem with inflation. We have a cost of living problem,” he said last month.
But economists said Turkey’s official data masked a more troubling trend of rising prices that showed no sign of abating.
A monthly report published by the Turkish group of independent economists ENAG showed that consumer prices rose 175% in June compared to a year earlier. ENAG said prices have risen 71.4% since the start of 2022.
The Istanbul Chamber of Commerce reported that inflation in Turkey’s largest city had reached an annual rate of 94%.
“Nobody really believes the official Turkish data anymore,” said Timothy Ash, an economist at BlueBay Asset Management. “There is no expectation of anything resembling a credible political response.”
The growing dispute over the reliability of Turkey’s official data is expected to be a difficult political issue for Erdogan’s government ahead of next year’s general elections, which are seen as the toughest of his two-decade rule.
Kemal Kulçdaroğlu, leader of the main opposition party, accused the state statistics agency of “lying”, urging it in a tweet to “stop committing crimes in favor of President Erdogan”.
A poll published by polling agency Metropol on Friday showed that 69% of respondents believed ENAG’s unofficial figure and only 24% believed 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 from the US Federal Reserve in 2013. Since then, its currency has been collapsing. In 2013, the pound was worth 36p, compared to 4.9p on Monday.
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To stem the decline, Erdogan embarked on what he called a “new economic model” in 2018, which meant putting aside rising inflation and cutting interest rates to spur economic growth.
This was done against the advice of its central bank chief and sent the pound falling to a record low, raising costs in a country that is dependent on imported materials, especially energy.
Inflation, which officially stood at 15% in early 2021, is now at its highest level since the currency collapsed during the 1998 debt crisis that helped bring Erdogan to power.
Three central bank chiefs have been fired by the president since 2018. The Turkish lira has collapsed by 20% this year alone.
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