Although officially slowed to 49.38% over one year in September, inflation is still running high in Turkey where it has even become “chronic” despite the efforts of the authorities, according to economists interviewed by AFP.
Turkey has been caught in an inflation spiral fueled by the depreciation of the Turkish lira for two years, with peaks at 85.5% in October 2022 and again at 75.45% in May.
The official statistics are disputed by independent economists at the Turkish Inflation Research Group (Enag), who estimated year-on-year inflation at 88.63% in September.
Ankara, however, hopes to reduce inflation to 17.6% at the end of 2025 and to less than 10% in 2026, according to Finance Minister Mehmet Simsek.
President Recep Tayyip Erdogan recently congratulated himself on having “started the process of permanent disinflation”. “The difficult times are behind us,” he said.
But for economists interviewed by AFP, the surge in consumer prices has become “chronic” in the country.
“The increase in prices over one month is still high, at 2.97% for Turkey and 3.9% for Istanbul. We cannot speak of a success here,” says Mehmet Sisman, professor of economics at the Marmara University in Istanbul.
“We are trying to bring down inflation only through monetary policy and raising interest rates. But this is stifling the economy,” he adds.
– “Black holes” –
Contrary to classic economic theories, the head of state has long defended the reduction in interest rates by invoking the precepts of Islam, which prohibits usury. But after his re-election in May 2023, he left the way open to the central bank to raise its main key rate from 8.5 to 50% between June 2023 and March 2024 in order to stem inflation.
The rate remained unchanged in September for the sixth consecutive month.
“The fight against inflation revolves around the priorities of the financial sector. Thus, it is done indirectly and generates uncertainties,” denounces Erinç Yeldan, professor of economics at Kadir Has University in Istanbul.
For Yakup Kuçukkale, professor of economics at the Black Sea Technical University, the increase in interest rates cannot be enough to overcome inflation without remedying the “black holes” in the budget.
The expert denounces a “budget deficit at a record level” of 129.6 billion Turkish liras (3.45 billion euros) in August 2024, according to the Ministry of Finance.
“Mr. Simsek explains this by the expenses linked to the reconstruction of the regions affected by the earthquake of February 2023 (which left more than 53,000 dead, Editor’s note). But the real black hole lies in the costly public-private partnership contracts “, he says.
Criticized by the opposition for often being awarded to companies close to power, these infrastructure contracts – construction and management of highways, bridges, hospitals or airports – are accompanied by advantageous guarantees for service providers, such as compensation by the Statement of their income in the event of a lack of users.
“We should question these contracts which weigh on the budget because the compensation is indexed to the dollar or the euro,” notes Mr. Kuçukkale.
The anti-inflation measures also mainly target low-income households, he denounces, whose minimum wage has not been raised since January. “However, these groups already have low purchasing power. To reduce demand, we should target high-income groups, but there are almost no measures in this direction,” he regrets.
“Austerity measures”, such as the elimination of cleaning in public schools, still affect the most disadvantaged and reinforce inequalities, Mr. Yeldan also notes.
The economist recommends “a tax on wealth, on financial transactions or real estate income”.
But the ruling party, the AKP (Justice and Development Party, Islamo-conservative), cannot take these measures because “it relies on a system of rents distributed to pro-government companies”, he says. .
According to a study published by the private Koç University, households expect annual inflation of 94% at the end of the year, well above the central bank’s forecasts.
“The rise in prices experienced by the middle and lower classes is more poignant because it concerns essential products and services such as food, housing or education, where inflation remains very high,” recalls Mr. Sisman.
