Econostrum | Economic News in the Mediterranean

New inflation record in Turkey

Written by Gérard Tur on Tuesday, July 5th 2022 à 17:35 | Read 288 times

With almost 80% inflation in June over twelve months, Turkey is sinking into economic crisis. The reality would be even worse, because to stay in office, the directors of the Tüik (Turkish National Statistics Office) are forced to publish figures in line with the presidential speech. Four have already been fired.

The Turkish lira continues to lose ground against the dollar (photo: TCMB)
The Turkish lira continues to lose ground against the dollar (photo: TCMB)
TURKEY. Turkish inflation is going from peak to peak. Officially 73.5% in May (over a 12-month rolling period), it exceeded 78% in June according to the Tüik (Turkish National Statistics Office). This is a quarter-century old record. And the reality is much worse according to Enag, an inflation research group of Turkish economists, which estimates the real rate at over 175%.
Despite these catastrophic statistics, President Erdogan continues to claim that Turkey "does not have an inflation problem". He is sticking to his guns by keeping interest rates low. This is economic heresy because it encourages credit, i.e. money creation and therefore inflation. In the United States as in Europe and almost everywhere else in the world, central banks are currently raising interest rates to increase the cost of money and slow down the inflationary spiral.
But not Turkey. And beware of those who do not deliver the "right" word. The President has already sacked four directors of the Tüik, whose statistical services published inflation rates that were at odds with his original vision of the economy. He has also sacked three central bank directors and three finance ministers.
Turkey is facing a double whammy as energy and grain prices are soaring internationally. It imports these products and has to pay for them with a currency that has lost almost half its value against the dollar in a year. On the ground, Turks have to survive with food and transport prices doubling.
To limit social discontent, the Turkish government increased the minimum wage by 50% in early 2022. It gave a second boost of +30% in July.

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