As of: February 13, 2024, 6:01 p.m
By: Lisa Mayerhofer
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Price increases in Turkey continue to be massive and the lira is plummeting.
There is no improvement in sight any time soon.
Istanbul – Turkey continues to struggle with high inflation and its consequences.
Turkish consumer prices rose by an average of almost 65 percent in January compared to the same month last year, the statistics office announced on Monday.
From December to January alone, prices rose by 6.7 percent - more than twice as much as in December.
Consumers were asked to pay more, particularly in the areas of healthcare, hotels and restaurants.
Massive inflation in Turkey - resignation of the central bank chief
The data comes after the surprise resignation of central bank chief Hafize Gaye Erkan last week.
It had aggressively raised interest rates from 8.5 to 45 percent since last June in order to curb inflation.
Her successor, Fatih Karahan, is expected to continue the restrictive policies.
“We will keep an eye on inflation expectations and price developments,” Karahan said on Sunday.
“We stand ready to act if the inflation outlook worsens.”
The influential Turkish President Recep Tayyip Erdogan, a declared opponent of interest rates, elevated the previous deputy governor to the top job on Friday.
Incumbent Erkan had previously unexpectedly resigned after less than eight months.
The former finance manager cited personal reasons for her resignation.
She was the target of a campaign to damage her reputation.
Turkish President Recep Tayyip Erdogan has raised the minimum wage - further fueling inflation.
(Archive image) © Marton Monus/dpa
Raising the minimum wage fuels inflation
Experts cite the unexpectedly large increase in the minimum wage at the beginning of the year - an election gift from Erdogan - as the reason for the rising inflation rates despite the central bank's efforts.
Labor Minister Vedat Isikhan announced that the monthly minimum wage would rise to 17,002 lira (516 euros).
This represents an increase of 49 percent compared to the level set in July.
Compared to January 2023, it has even doubled.
Around seven million Turks will benefit from the higher wage floor.
The problem: Such high wage increases make it unlikely that inflation will fall any time soon.
There are also doubts about the statistics office's figures, reports the
Handelsblatt
.
The Istanbul Chamber of Commerce published an index of consumer prices in the city, which shows that consumer prices in Istanbul have been rising more for some time than the officially published inflation rate suggests.
The Turkish central bank has given up control over the lira.”
At the same time, the Turkish currency is suffering - the lira has plunged to a new record low.
30 lira now equals one dollar.
In autumn 2021 it was still less than ten lira, reports the newspaper
.
The lira has lost two thirds of its value since then.
This development makes imports from abroad considerably more expensive for the Turkish population and companies, but for holidaymakers from abroad, trips to Turkey become cheaper.
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Thomas Gillet, analyst at the rating agency Scope, warns in
Handelsblatt
that the financial risks will remain high if there is no progress in the fight against inflation.
He tells the newspaper: “This is also because the Turkish central bank has given up control over the lira.” It does not make any effort to keep the exchange rate at a certain level.
With material from Reuters