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Turkey inflation crisis: Slight respite from dizzying heights

Turkey’s consumer price index slowed slightly in November for the first time in more than 18 months though an increase may occur again in the run up to the country’s elections.

The latest data shows that inflation eased to 84.39 percent, according to state statistics agency TUIK, down from 85.51 percent in October. It is the first drop since May, 2021.


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The statistical effect of a high base a year earlier and two months of relative stability in the Turkish currency have helped contain cost increases, despite high energy prices and input costs. On a monthly basis, prices grew 2.9% in November.

Since reaching a low of 16.6 percent in May 2021, Turkey’s inflation has raced ahead, severely denting household income levels. Experts say, however, that the real rate of inflation is much higher, in the triple digits.

Turkey’s ENAG research institute estimates that the annual rate of consumer price increases reached 170.70 percent in November.

President Recep Tayyip Erdogan has forecast that consumer price rises would soon slow down as he seeks re-election at the June, 2023, national polls.

“We will witness the rapid descent of inflation soon and we will see together that the dirty scenarios built on this trouble are torn and thrown away,” said Erdogan.

Officials in Ankara blame external influences for the astronomical inflation, such as high commodity prices brought on by the Ukraine war.

Record highs

Record-high consumer price hikes this year have been the highest level since Erdogan swept to power in 2002 as Turkey adopted policies that prioritized economic growth and cheap lending at the expense of the lira and price stability.

“Expansionary fiscal and credit policies ahead of general and parliamentary elections in mid-2023 will add to inflationary pressures. But, even as monthly price gains remain positive, annual inflation is set to decelerate through to the fourth quarter of 2023 due to high levels in base periods,” economist Selva Bahar Baziki, told Bloomberg.

At a time where central banks around the world have been slashing interest rates to get a grip on out-of-control prices, policymakers in Turkey have been moving in the opposite direction.

Turkey’s central bank has slashed interest rates by 5 percentage points since August, down to 9%. Erdogan supports an unorthodox economic view that lower rates will spur growth, raise investments, boost job growth and eventually lead to price stability.

Housing prices soar

In this inflationary environment, Turkish housing prices have skyrocketed.

In a recent report, Turkey’s central bank warned that the country was facing one of its worst property crises on record,

The bank said that the average price of a property in Istanbul had reached 1.6m Turkish lira ($110,000) in 2022, up from 750,000 Turkish lira last year, effectively squeezing out locals from the housing market amidst tight supply levels.

Strong demand for homes in Turkey has been fuelled by foreign buyers led by Russian investors, while increasing construction costs have also contributed to upward price pressure.

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