Turkey’s Annual Inflation Rate Nearly Reaches 80%
Jose Nino
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Per data that was released on July 4, 2022, Turkey’s annual inflation rate stands around 78.6%. According to The Crade’s News Desk, consumer prices increased by 5%.
Turkey’s inflation woes are largely the product of the expansionary monetary policy its central bank has pursued. Turkey’s central bank has been slashing interest rates as part of a new strategy of promoting economic growth.
Several economic experts argue that inflation could reach 100% by this fall.
The highest increases in prices took place in June in the transportation sector, which grew by 10% on a monthly basis. Similarly, fuel prices surged by 22% in June. Annual food inflation almost reached 94%.
President Recep Tayyip Erdogan has stood his ground with regards to Turkey’s loose monetary policies and refuses to pursue a tight monetary policy.
Elections are taking place on June 18, 2023, thus making demagogic monetary policies an attractive tool for Erdogan to shore up his political coalition. Erdogan believes that loose monetary policies boost markets and increase employment.
Towards the end of 2022, the Turkish lira lost 50% of its value against the United States dollar. As The Cradle noted, “The drop has resulted in a sharp rise in import costs for companies and households.”
Opposition leaders in Turkey argued that Erdogan has pressured the national statistics agency to obfuscate the price increase as a way to protect the Erdogan government’s image as the 2023 general elections quickly approach.
According to the latest opinion polls, the principal opposition party to Erdogan’s Justice and Development Party (AKP), the Republican People’s Party (CHP), is expected to receive at least 55% of the vote. All things considered, Erdogan is politically on the ropes.
As a G20 country, Turkey potentially experiencing hyperinflation could lay the groundwork for a major international crisis. The world is currently going through a series of geopolitical and geoeconomic upheavals, and with Turkey on the verge of hyperinflation, more fuel would be added to the fire.
If Turkey doesn’t correct course, we could witness a uniquely disastrous economic collapse that will reverberate across Eurasia. Turkey is an emerging regional power with great power aspirations. However, all of that lofty vision could come crashing to a halt if Turkey doesn’t get its monetary house in order.
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