Consumer prices rose 78.6% last month compared to June 2021, due to soaring food and drink and transportation prices. Food prices have almost doubled in a year, while the cost of transport has increased by 123%, according to data from the Turkish Statistical Institute.
Turkey’s economy is exposed to the same forces of global inflation as other countries, but President Recep Tayyip Erdogan’s unorthodox economic policies have inflamed the crisis, as has the collapse of the lira, which makes imports much more expensive. .
In September, Erdogan scrapped the settlement and asked Turkey’s central bank to start cutting interest rates as prices rose, rather than raising them.
Erdogan defended his monetary policy, saying lowering rates would reduce inflation and boost production and exports. He blamed his country’s economic problems on foreign interference.
Nureddin Nebati, Turkey’s economy minister, said in a tweet on Monday that “continued sharp increases in global commodity prices, especially energy and agricultural products” fueled inflation in June.
He said the government was taking steps to protect people from soaring prices, including cutting sales taxes and providing subsidies.
But the move could push the country further into a dangerous wage and price spiral that would make matters even worse.
S&P Global Ratings said in a report last week that inflation combined with the low value of the Turkish lira will continue to weigh on consumer spending. He expects annual inflation to remain above 70% until the end of the year, and above 20% until at least mid-2023.
“The recession in Russia and Ukraine, as well as slowing growth in the euro zone and the United Kingdom will weigh on exports, which until recently have been the main driver of Turkey’s growth,” the report said. report.
A rebound in international tourism will bring some relief this summer, according to the report, by boosting foreign exchange earnings. This might support reading.
— Julia Horowitz, Gul Tuysuz and Jomana Karadsheh contributed reporting.