Since the beginning of this year, inflation in Turkey has continued to run at a high level. The latest data released by the Turkish Bureau of Statistics on September 5 showed that the country's Consumer Price Index (CPI) rose 80.21% year-on-year in August, surpassing 79.6% last month and setting a 24-year record high, at the highest level since President Recep Tayyip Erdogan took office. Turkish Finance Minister Nabatti said the government will remain committed to fighting inflation and expects inflation to slow further in the coming months, with inflation expected to fall to single digits in Turkey by 2025.
Reuters, the Financial Times and other media have paid attention to the trend of inflation in Turkey
According to the comprehensive Reuters and Financial Times, the data shows that compared with the same period last year, the Turkish traffic price increased most significantly in August, reaching 116.87%; In the key food and non-alcoholic beverage sectors, prices rose 90.25%, all higher than the overall inflation level of the month. Inflation of 80.23% in August was also the highest level in Turkey since 81.4% in August 1998.
In addition to the CPI, Turkey's Production Price Index (PPI) rose 2.41% month-on-month and 143.75% year-on-year in August.
Turkey's inflation level has been "feverish" for months, and there has been no cooling momentum. Turkey's CPI rose by more than 70% from May to July, with July's CPI up 79.6% year-on-year, but now it is quickly being overtaken by The August data.
CPI trends in Turkey from July 2016 to August 2022 (Statista data website)
Just a day before the release of the August inflation data, the Turkish government announced its economic plan for 2023-2025 on the 4th.
The plan proposes that Turkey's economic growth targets for 2023, 2024 and 2025 will be 5%, 5.5% and 5.5% respectively; Inflation is expected to be 65% this year and is planned to fall to 24.9%, 13.8% and 9.9% in 2023, 2024 and 2025, respectively; The unemployment rate is expected to be 10.8% this year and is planned to fall to 10.4%, 9.9% and 9.6% in 2023, 2024 and 2025, respectively; The foreign trade deficit is expected to be $105 billion and $80 billion this year and next year, respectively.
"We expect Turkey's annual exports to reach $305 billion by the end of the planning year, the unemployment rate to fall sharply to 9.6 percent, the current account deficit to 0.9 percent of GDP, and the inflation rate to fall to single digits." Nebati wrote on Twitter.
Turkish Finance Minister Nebati (infographic)
Then, on the 5th, Nebati sent several tweets in a row, trying to convey confidence in the Turkish economy to the outside world.
"The world's largest economies are grappling with fears of inflation and recession. These countries fear that their economies will stagnate in the face of the highest inflation rates in the past four or five decades. ”
He expects the pace of inflation in Turkey to slow down in the coming months, or to 65 percent by the end of the year, "and we will drive high inflation out of this land and never come back." Nebati said Turkey would "continue to fight inflation without stopping investment and production." We also use policies to encourage investment and production. ”
A shoe shop owner in Istanbul, Turkey, may 5, 2022. （CNBC）
Compared with the predictions of the Turkish government, some institutions and people inside and outside Turkey have given different statements.
Ahead of the release of Turkey's economic data on the 5th, US investment bank Goldman Sachs issued a warning that the inflation situation in Turkey is "disturbing", expecting Turkey's inflation rate to exceed 90% in October and November, and then drop to 75%.
Reuters mentioned that some opposition lawmakers and some economists in Turkey have questioned the reliability of government data. According to a poll, about 50 percent of Turkey respondents believe inflation is much higher than official data. According to Reuters' own analysis, inflation in Turkey will only be just below 71% at the end of 2022. Bloomberg reported more bluntly that Turkey "is still to come."
It is worth noting that despite high inflation, Turkey has so far struggled to maintain an "ultra-loose" monetary policy with low interest rates.
From September to December last year, Turkey's central bank cut interest rates in a row, with benchmark rates cut by a total of 500 basis points. This year, Turkey announced a 100 basis point to 13 percent rate cut in August after staying its benchmark rate unchanged for seven consecutive months, and the Turkish lira fell to a near-all-time low against the dollar.
CNBC described Turkey as "shocking the market" by maintaining low interest rates against high inflation.
The U.S. Consumer News and Business Channel (CNBC) wrote on August 18 that Turkey's interest rate cuts against high inflation "shocked the market." Turkey's economy grew rapidly in previous years, but Erdogan refused to adopt meaningful austerity policies to cool the resulting inflation, calling interest rates the "mother of all evil."
The Bloomberg article also argues that Erdogan wants to boost economic growth through low-cost lending, especially when the election is less than a year away. Throughout the last three years, Turkey's inflation rate has remained in double digits, an "unfortunate side effect" of prioritizing economic growth and cheap lending policies.
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