Turkey announces three-year anti-inflation austerity plan

Turkey announces three-year anti-inflation austerity plan
Turkey announces three-year anti-inflation austerity plan

Turkey announced on Monday a three-year savings plan aimed at reducing public spending to escape inflation which reached 70% year-on-year in April. “Our priority is to combat the cost of living. Low single-digit inflation is essential for sustainable growth», Said Economy Minister Mehmet Simsek during the presentation of the savings plan in Ankara. The plan provides for numerous budget restrictions “for the entire public service“, some of which require legislative changes which will be submitted to Parliament, the minister said.

The purchase or rental of any new public service vehicle will thus be prohibited for three years, with the exception of “mandatory needs» concerning the health, security and defense sector. The use of imported vehicles will also end within the public service, the minister promised, and the use of public transport imposed on civil servants. With the exception of those carried out against seismic risks, or following natural disasters, the construction or purchase of public buildings are also suspended for three years.

Other budget cuts are also planned to “discipline spending” such as the reduction of 10% of public budgets for the purchase of goods and services and 15% for investments, with the exception of expenditure concerning affected regions. by the earthquake of February 2023 (more than 55,000 deaths). The minister did not specify the government’s policy on salaries, but the number of recruitments in the public service will be limited to the number of retirements, he assured.

A spike in the inflation rate at 69.8%

In mid-April, the Turkish Minister of Labor, Vedat Isikhan, announced in mid-April the freezing of the minimum wage usually raised in July, unlike the two previous years. The net minimum wage was increased by almost 50% on January 1, to reach 17,002 Turkish liras (489 euros). Inflation reached 69.8% year-on-year in April in Turkey, compared to 68.5% in March, according to official data published in early May. Last week, the governor of the Central Bank of Turkey Fatih Karahan estimated that inflation would start to fall in June, and revised his forecast for the end of the year slightly upwards, to 38% from 36%.

Mehmet Simsek confirmed the return to single-digit inflation at the end of 2025. The dizzying rise in consumer prices and the weakening of the Turkish lira against the dollar and the euro are considered responsible for the severe electoral setback inflicted on the President Recep Tayyip Erdogan and his party, the AKP, during the municipal elections on March 31. A group of independent Turkish economists (Enag) estimates inflation at more than 124% year-on-year in April, up 5 points over one month.

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