ISTANBUL, Turkey— Turkey’s inflation has
soared to a new record, official data showed Monday, as analysts see an impact
from Russia’s invasion of Ukraine and
President Recep Tayyip Erdogan’s
unorthodox interest rate policy.
اضافة اعلان
Exacerbating a cost of living crisis, the consumer inflation rate increased to 61.14 percent at an annual rate, up from 54.4 percent in
February, according to the statistics agency.
The weakening lira and runaway inflation have become
major sources of public discontent in
Turkey as President Recep Tayyip Erdogan
faces an election next year.
Turkey has
recorded double-digit inflation since early 2017 but the latest figure is the
highest since the ruling
Justice and Development Party (AKP) came to power in
2002.
The currency was stable following the latest
inflation data, trading at 14.7 lira against the dollar and 16.2 lira against
euro.
The war in Ukraine has had a
major impact on the country as Russia is a key supplier of energy while
Ukraine supplies Turkey with wheat. The Turkish tourism industry also mainly relies on Russian tourists.
On Friday, S&P global rating agency kept a
negative outlook on Turkey and cut its credit rating.
“The fallout of the
Russia-Ukraine military conflict, including rising food and energy prices, will further weaken Turkey’s
already tenuous balance of payments and exacerbate inflation,” it said.
The biggest price increases in March were in
transportation and food prices, according to the statistics agency.
‘Be patient’
While countries around the
world are facing rising inflation as energy prices have soared while economies
emerge from
COVID-19 restrictions, Turkey’s problems have also been affected by
Erdogan’s unorthodox economic approach.
The Turkish leader rejects the idea that inflation
should be fought by hiking the main interest rate, which he believes causes
prices to grow even higher — the exact opposite of conventional economic
thinking.
Turkish central bank “policies are just not working
in countering inflation,” said Timothy Ash, emerging markets strategist at
BlueBay Asset Management.
“Indeed, I think the overwhelming consensus is that
the unorthodox policy settings of the CBRT (central bank) are a major cause of
inflation,” he said in a note to clients.
“The war in Ukraine is just making things that much
worse.”
On Saturday, Erdogan said increase in food and
energy prices triggered by the war in Ukraine “is affecting us too.”
“We are fighting against those who are charging
unreasonably high prices,” he said.
“There are problems we need to address ... I ask you
to be patient and trust us,” in reference to people squeezed by the biting
inflation.
In January, Erdogan changed the head of the state
statistics agency.
Turkish media reported that he was unhappy with the
inflation figures it published while the opposition believes that the official
figures grossly underestimate the reality.
Jason Tuvey, senior emerging markets economist at
the
London-based Capital Economics, said inflation was likely to rise further
over the coming months and stay close to the current high rates for much of
this year.
“But there is still little sign that the central bank and,
crucially, President Erdogan are about to shift tack and hike interest rates,”
he said.
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