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Inflation rate in Turkey rises to almost 70 percent

2022-05-05T13:32:34.600Z


In Turkey, already high consumer prices continued to rise in April. Goods and services are becoming more and more expensive, food prices have almost doubled.


Enlarge image

Man at a market in Istanbul: groceries are almost 90 percent more expensive than a year ago

Photo: Onur Dogman / ZUMA Wire / IMAGO

Inflation in Turkey has been out of control for months and has now reached a new high.

Consumer prices in the country rose more in April than in 20 years, according to the statistics office.

Goods and services cost an average of 69.97 percent more than a year earlier.

Rising oil and commodity prices as a result of the Russian war against Ukraine contributed to the sharp increase, as did the devaluation of the local currency, the lira, which made imports more expensive.

For comparison: The German inflation rate was 7.4 percent in April, which is the highest level since 1981.

The prices in the Turkish transport sector – which includes petrol, for example – rose particularly sharply by 105.9 percent.

But groceries and non-alcoholic beverages also rose at an above-average rate of 89.1 percent.

Key interest rate stable at 14 percent

Economic experts assume that inflation will remain exceptionally high until the end of 2022 due to the Ukraine war.

Economists expect inflation to average 52 percent for the year.

The experts blame the fall of the lira for the development.

Because the devaluation makes it more expensive to import goods into the country.

In addition, there are comparatively high raw material prices on the world market.

This is another reason why the country is in a difficult economic situation, which is reflected, among other things, in high unemployment.

The fall in the lira was triggered by interest rate cuts by the central bank, which made the national currency less attractive to investors.

President Recep Tayyip Erdoğan describes himself as a »interest enemy«.

He wants to boost credit and investment through low interest rates, and there are presidential elections again in 2023.

Central bankers are actually fighting runaway inflation with higher interest rates.

Because without interest, investments in Turkish assets are now even less attractive for investors, the currency is even weaker - and further fuels inflation as imported goods become more expensive.

However, the Turkish government hopes that inflation will come down under its new economic program.

This provides for low interest rates to boost production and exports.

The central bank has kept its key interest rate stable at 14 percent in four meetings so far this year.

According to most economists, it would have to raise interest rates in order to make the currency more attractive.

The lira has lost 44 percent of its value against the dollar over the past year, fueling inflation.

The central bank is assuming that the peak in inflation will be reached in June.

They do not expect single-digit inflation rates until 2024.

Apr/Reuters

Source: spiegel

All business articles on 2022-05-05

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