Rising inflation is closely linked to the weakening Turkish lira. The national currency has lost more than 40 percent of its value against the dollar in the past year.
(Photo: dpa)
Istanbul Consumer prices in Turkey rose the fastest in 24 years in August. Goods and services rose by an average of 80.21 percent compared to the same month last year, as the statistics office announced on Monday.
Economists surveyed by the Reuters news agency had even expected an inflation rate of 81.2 percent. From July to August alone, the cost of living increased by 1.46 percent. According to the Central Bank’s forecast, inflation will not peak until autumn, with inflation rates approaching 90 percent. According to surveys, many Turks do not believe the official statistics: They believe that prices are rising even more than officially reported.
Transport costs – which include petrol, for example – increased by 117 percent in the past month. Food and non-alcoholic beverages rose in price by more than 90 percent. Consumers also had to dig deeper into their pockets for furniture and household appliances: they cost an average of 92 percent more than in August 2021.
>> Read here: Inflation in the euro area rises to a record level – Bundesbank boss calls for “major interest rate hike”
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The main reason for the currently sharply rising prices is the consequences of the Russian war against Ukraine, which has made many raw materials significantly more expensive. However, rising inflation is also closely linked to the weakening lira: the national currency lost 44 percent of its value against the dollar last year and a further 27 percent so far this year.
The reason for this is that the central bank has gradually lowered its key interest rate from 19 percent to the current 14 percent since last autumn, although economic textbooks actually recommend interest rate hikes when prices are rising sharply. Falling interest rates make a currency less attractive to investors. The weak lira, in turn, makes imports more expensive, on which Turkey, which has few natural resources, is dependent.
President Recep Tayyip Erdogan wants to boost the economy with low interest rates. According to a government forecast, the inflation rate is expected to fall to 65 percent by the end of the year. By the end of 2023, it should then fall to almost 25 percent, according to a forecast published on Sunday.
More: 80 percent inflation at 7.6 percent growth: when will Turkey implode?