Econostrum | Economic News in the Mediterranean

Turkish inflation hits two-decade high

Written by Frédéric Dubessy on Tuesday, January 4th 2022 à 16:20 | Read 346 times

TURKEY. According to data published on Monday 3 December 2022 by its National Statistics Office (TUIK), inflation in Turkey has reached 36.08% over one year. This figure, a record since September 2002, exceeds the government's forecasts by seven times.

In December 2021, the rate was 13.58%. The smallest annual increase was 8.76% for communications, followed by education (17.23%) and alcohol and tobacco (20.02%). The highest increases were recorded in transport (53.66%), food and non-alcoholic beverages (43.80%) and furniture and household equipment (40.95%). Over one year, prices of flour and chicken rose by 86%, those of sunflower oil and bread by 76 and 54% respectively.

Recep Tayyip Erdogan's decision to raise the hourly minimum wage from 2,825.90 to 4,253.40 Turkish lira (€189.30 to €284.92) on 1 January 2022 - i.e. a 50.4% increase in salary for a single, unmarried worker without children - will not absorb all these increases. Nor will the waltz of economic ministers and central bank presidents (TCMB) orchestrated by the Turkish president over the past three years.
The annual rate of consumer prices continues to rise in Turkey (graph: TUIK)
The annual rate of consumer prices continues to rise in Turkey (graph: TUIK)

Exports reach record high in 2021

In order to curb inflation, Recep Tayyip Erdogan refuses to raise interest rates and relies on economic growth. However, on 20 December 2021, he unveiled the launch of indirect measures based on the issuance of new debt securities with a guarantee cancelling the differential between the exchange rate and the interest rate. The president "aims to achieve 5% economic growth by 2022 to become a country with a trade surplus", according to his own statement on Monday 3 January 2022.

Gross domestic product growth was 7.4% year-on-year in the third quarter of 2021. It is effectively and mainly based on the increase in exports favoured by the fall of the Turkish lira (-45% against the dollar over one year), which in turn feeds inflation.
In 2021, exports rose by 32.9% compared to 2020 to reach $225.36bn (€199.24bn), a record increase of 32.9%. "Turkey is on the verge of a major transformation in exports (...) This year we have exceeded a level that we have been aiming for for a long time," Mehmet Mus, the Turkish trade minister, had already expressed his delight on Tuesday 28 December 2021, leaving the first announcement of the figures to his president.

​A 2022 objective of $250 billion in exports

"Over the twelve months of the year, we have broken records for exports over eleven months (...) In seventy-five categories of products, we have reached the highest levels of exports in the history of our Republic", Recep Tayyip Erdogan was therefore pleased to announce on Monday 3 December 2022. He was keen to point out that "in 2002, the volume of our foreign trade was only $87.6 billion. In 2021, it was $496.7bn (€440.21bn). And set a new export target of $250bn (€21.12bn) for 2022.

The Turkish president revealed that the government has set itself the goal of getting out of the trade deficit - down 7.8% to $45.9bn (€40.59bn) with an import-export coverage rate of 83.1% - as soon as possible. And he said, "why not in 2022?"

"For the first time, Turkey has not been a country that collapses under the weight of the crisis, but a country that manages the crisis, and even transforms it into an opportunity," he stressed. Some 2 million more jobs would have been created in 2021 than before the pandemic.

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