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Turkey’s inflation rate soars to 73%, hits 23-year high

Friday, 03 June 2022 5:41 PM [ Last Update: Friday, 03 June 2022 5:46 PM ]

This file photo shows a view of a typical traditional Bazaar setting in Istanbul, Turkey.

Turkey’s inflation rate has soared to some 73 percent year on year, unprecedented in over two decades, as Ankara grapples with increasing food and energy costs.

Official data released on Friday showed that in the month of May, prices were 73.5 percent higher compared to a year ago and up from the 70 percent annual inflation rate registered in April.

Transport, food prices, and household furnishings recorded the sharpest rise in annual inflation, with transport costs up by 107.6 percent in May while food followed with 91.6 percent.

Turkey’s inflation rate in May was the highest since 1998 when a diplomatic crisis resulted in a sharp decrease in capital inflows leading to an economic slowdown in the country.

The recent inflation has been linked to the rise in the global price of energy.

European economic crisis: inflation and rising energy prices

The Ukraine conflict continues to devastate the world economies, particularly in the Eurozone.

The energy price spike is widely attributed to Russia’s special military operation in eastern Ukraine and the COVID-19 pandemic.

Meanwhile, Turkey’s inflation is expected to remain close to 70 percent until the end of 2022.

“A broad-based deterioration in price dynamics, a relatively high trend inflation, and an increase in the exchange rate pass-through point to a more challenging inflation outlook than envisaged by the [Turkish central bank’s] latest forecast trajectory,” economists from Citi said in a note ahead of the data release on Friday.

Also, economists link the Turkish Lira’s loss of value against hard currencies due to technical and fundamental factors exacerbating the country’s current soaring inflation rate.

The Turkish Lira now stands at 16.49, from about 6 two years ago, against the US Dollar.

Vice President: Lira crashing due to some acts against Turkey

The Turkish Lira has been weakening to record lows against the US dollar, with officials blaming foreign powers in the lira crisis, saying lowering the interest rates isn’t the reason behind the crash in the value of the currency.

Recent rumors of Turkey’s military intervention in northern Syria have further weakened the Lira against hard currencies.

Critics also blame the high inflation rate in Turkey on President Recep Tayyip Erdogan’s monetary policy.

Erdogan has called on Turks to trust his policies, promising economic prosperity as a result of growth driven by low interest rates.

With parliamentary elections slated for June 2023, Erdogan’s critics and some economists may claim that the real inflation rate in Turkey is much higher than official figures say and the government is deliberately underestimating the rate of inflation for political reasons; mainly, to not lose its supporters’ votes in upcoming elections.

In this regard, the Inflation Research Group, made up of independent Turkish economists, said on Friday that inflation actually accelerated by 160.8 percent, more than twice the 73.5 percent official figure.

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