Tuesday, October 04, 2022

Turkey's Inflation

 Inflation in Turkey has climbed above 83% - a 24-year-high. The transport, food and housing sectors have seen the biggest rise in prices. Independent experts the Inflation Research Group estimate the annual rate is actually 186.27%. The transport sector saw the sharpest increases in annual prices at 117.66%, followed by food and non-alcoholic drinks at 93%.

Last year  President Erdogan took the unorthodox step of cutting interest rates to try to boost the economy. Most central banks raise interest rates to fight inflation.

Last year's cut in interest rates from 19% to 14% has led to a fall in the value of the Turkish lira, which means it costs more for the country to import goods from abroad. The lira, meanwhile, hit a new record low of 18.56 against the US dollar.

Foreign currency debt is a problem for the private sector and most companies have found it is more profitable to hold products in storage rather than sell them, because of the lira's volatility and inflation. It all adds up to more poverty and a widening gap in income and wealth equality.

Turkey's economy is heavily dependent upon imports for producing goods from foods to textiles, so the rise of the dollar against the lira has a direct impact on the price of consumer products.

Take the tomato, a vital ingredient in Turkish cuisine. To grow tomatoes, producers need to buy imported fertilisers and gas. Tomato prices were up 75% in August, compared with the year before.

One in five young people in Turkey is out of work; it is even worse among women. Turkey has the world's fourth highest rate of youth not in employment, education or training, according to the OECD.

Inflation in Turkey surges to 83% - BBC News

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