Inflation - Turkey degenerates into a "1 lira store": Erdogan lets inflation run free - the population becomes impoverished

Created: 01/17/2022 17:32

By: Markus Hofstetter

President Erdogan's economic policy course is highly controversial.

© -/Kremlin/dpa

Recep Tayyip Erdogan is driving Turkey to the brink of collapse with his erratic economic policy.

Population and economy are suffering worse and worse from inflation.

Ankara – Turkey* has had a difficult year.

Fires destroyed huge areas along the Mediterranean coast last summer*.

In March, the country withdrew from the Istanbul Convention*, which prescribes binding legal norms against violence against women and against domestic violence. 

But the dominant theme was, and still is, the collapse of the economy.

Its most visible sign is inflation.

According to the Turkish statistical office, the inflation rate jumped over the 30 percent mark in December and reached 36.08 percent year-on-year, the highest level for around 20 years.

Turkey: Bread, butter or eggs are becoming a luxury

Because of this, many Turks slide into poverty even though they work.

Normal grocery shopping has now become a luxury.

The prices of staple foods such as sunflower oil, eggs and butter have practically doubled in one year.

According to the bakery union, the price of flour exploded by 85 percent between April and November, and bread is becoming more expensive accordingly.

Istanbul and Ankara have been offering their citizens a so-called “people's bread” cheaper for many years.

If the offer was only taken up by a few, long queues are now forming in front of the issuing offices.

The 250 gram bread costs 1.25 Turkish lira (about six euro cents) here, while it costs 2.50 lira and more in the other bakeries.

Turkey: Unruly central bank governors to be fired

The lira is also on the decline. The Turkish currency fell to record lows against the dollar and the euro in November 2021. A dollar cost twelve lira, a euro over 14 lira. Exporters benefit from this, since their products become cheaper on the world market. But at the same time, the imports that Turkish industry depends on are becoming more expensive. This in turn strengthens the upward trend in prices in the country, and the products are becoming more expensive.

A main reason for this development is the erratic financial and economic policy of Recep Tayyip Erdogan*.

The Turkish President is putting enormous pressure on the central bank to keep interest rates low.

Anyone who defies his orders must leave.

In the past two years alone, he has fired three central bank governors.

The fact that the current boss Sahap Kavcioglu is still in office after about a year is because he is complying with Erdogan's wishes.

Turkey: Erdogan's poll numbers plummet

The reason for Erdogan's aversion to high interest rates is that, in his view, they not only curb growth, but also, contrary to the economic consensus, act as an inflation accelerator.

In addition, according to the Koran, he regards interest as an immoral instrument of exploitation.

With his policies, Erdogan himself is digging at the foundations of his power.

His popularity among the population is falling rapidly, and many now hold him personally responsible for the crisis.

In addition, many Turks also believe that the current leadership is incapable of overcoming the crisis.

That puts pressure on the polls.

For the first time in 18 years, Erdogan's AKP with 24 percent of the vote is behind the largest opposition party CHP* with 26.4 percent.

Strong criticism: Turkey degenerates into the "'everything 1 lira shop' of the neighboring countries"

In this situation, the words of 2018 Nobel Prize winner Paul Krugman seem almost prophetic.

Even then he warned of a "death spiral" for the Turkish economy.

At the time, he also explicitly named domestic events, such as repeated attacks on the independence of the domestic central bank, as possible triggers.

Voices are also being raised against Erdogan's policies in the country.

Former economy minister and current head of the opposition Deva party, Ali Babacan*, warned in December: “We are in the middle of the worst crisis in our recent history.

Mighty Turkey has almost become the 'everything for 1 lira shop' of neighboring countries.”

The opposition already senses the dawn.

Erdogan's next major test is the parliamentary and presidential elections next year.

Until then, he has time to turn things around and get voters back on his side.

*