Turkey’s annual inflation rate breached the estimates and settled at a 24-years high record of 78.62% for June, according to the Turkish Statistical Institute.
Increasing consumer prices are affecting the lives of 84 million people, with dim hopes of a correction soon as the Russia-Ukraine war is not showing signs of easing out and energy and food prices are reaching exorbitantly high. To add to the woes, Turkey’s national currency, Lira, is depreciating against US Dollars expediently.
In Turkey, transportation prices rose about 124% from the previous year, and food and non-alcoholic beverages became 93.93% dearer, according to government data. Apart from these, the price of household goods soared by 81.1 percent.
Erdogan-nomics: Reduce Interest Rate And Increase Minimum Wage
Turkey’s rapid growth in past years slowed down with President Recep Tayyip Erdogan’s decision to distance the economy from meaningfully increasing rates or maintain a hawkish stance to cool down inflation. Instead, he says interest rates are the “mother of all evil.” His firm stance resulted in the depreciation of the Turkish lira and the contracting spending power of an average Turk.
Notably, Erdogan forced the country’s apex bank to rather slash borrowing rates in 2020 and 2021. His instructions came at a point when the country was grappling with the Covid-19 virus, and the global supply chain struggled to cope. With the unfavorable economic environment, inflation had started to loom and show its color. Analysts believe the central bank is in the grip of the President. Those who chose to express dissent were laid off. By the spring of 2021, four different governors assumed the chair of Turkey’s central bank.
The central bank slashed the interest rate to 14% last fall, which so far remains the same. Lira nosedived 44% against the US dollar in 2021, and so far this year, it plummted almost 21%.
Turkey’s Economy Minister Nureddin Nebati on Friday “promised” that consumer prices would start decreasing in December.
All, for now, is slashing interest rates and increasing inflationary pressure on the people of Turkey. The complete world is in the claws of inflation, and many countries’ central banks, including India, are increasing the interest rate to fight inflation. In contrast, the Turkish leader does not believe in conventional economics and finds high-interest rates a reason behind the price rise.
Turkey on Friday upward revised the minimum wage for the second time in a year to soothe the pain of households. The net monthly take-home pay has reached 5,500 liras ($330) from 2,826 liras in late December and 4,253 liras in January. It shows the nominal minimum wage has double-folded since the end of last year.
Economists raised that boosting the pay of a substantial population should be coupled with interest hikes or other means of limiting spending if the country wants to bring inflation down.