Experts blame the weakening national currency, the lira, for the sharp rise in prices.
(Photo: Bloomberg)
Istanbul Consumer prices in Turkey rose in May at their highest rate in almost a quarter of a century. Goods and services cost an average of 73.5 percent more than a year earlier, the statistics office announced on Friday. This is the highest inflation rate since October 1998.
Prices in the transport sector – which includes petrol, for example – have more than doubled by 108 percent. Food (plus 92 percent) also cost almost twice as much as in May 2021.
Experts blame the weakening national currency, the lira, for the strong inflation, which lost 44 percent of its value against the dollar in the past year alone. This makes imports, on which the resource-poor country depends, significantly more expensive.
The slide in the lira was triggered by interest rate cuts by the central bank, which made the national currency less attractive to investors. President Recep Tayyip Erdogan describes himself as an enemy of interest rates. He wants to boost the economy with low interest rates.
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The government has said inflation will come down under its new economic plan. This provides for low interest rates to boost production and exports. In the first quarter, the Turkish economy grew strongly – by 7.3 percent.
“We assume that economic growth in Turkey will only be sluggish in the further course of this year,” explained the experts from the analysis company Capital Economics. “The fallout from the war in Ukraine and the continued weakness of the lira means inflation is likely to hover around 70-80 percent by the end of the year.”
The central bank is assuming that the peak in inflation will be reached in June. They do not expect single-digit inflation rates until 2024.
More: Boom at 61 percent inflation: The weird Turkish economic miracle