Turkish inflation is causing panic not only over the Bosphorus. In November, the pace of price growth accelerated even more. The currency crash causes the polls of President Erdogan and his political base to drop.
As the Turkish Statistical Institute (TUIK) announced today, inflation in November was over the Bosphorus 21.3 percent
against 19.9 percent a month earlier. This reading was higher than the market analysts’ expectations, who expected “only” 20.7 percent. On a monthly basis, inflation amounted to 3.5%, so the inflation target for the entire year is higher than in most developed economies.
In this context, it is worth adding that producer inflation in Turkey in November was as high as 54.6% against 46.3 percent in October, which was mainly related to more expensive raw materials and a weaker lira. It is hard to expect that such high inflation in producers would not be passed on to consumers.
The annual price dynamics in Turkey has reached the highest level in over 2 years (since April 2019). At that time, the CPI dynamics was falling from the long-term peak of 25%. – previously higher values (even 100% per year) were observed at the turn of the century.
Importantly, it is not transport (22.74% per year) or household maintenance (23.78%) that constitute the most expensive categories, which in the context of the increase in energy prices would seem quite intuitive. Meanwhile, the prices of food (27.11%) and home furnishings (25.14%) increased even more in Turkey. and the services of hotels, restaurants and cafes (28.9%).
It is worth adding that since 2012, the Turkish central bank’s inflation target has been 5%. Every year. During this time, it was not possible to meet it even once. The last performance of the monetary authorities with the set target took place in 2010, when inflation reached 6.4% and the target was 6.5%.
The new minister, the old song
Yesterday we informed about the change in the position of the Turkish finance minister. The new head of the ministry, Nureddin Nebati, confirmed in the first statements that the media, which pointed out him as an unequivocal supporter of the president’s controversial economic policy, were right. Recep Tayyip Erdogan believes that high interest rates are the cause of inflation, so in order to fight the high pace of price increases, rates should be cut. At the dictation of the president, the Turkish central bank cut interest rates three times this year (from 19% to 15% in total).
– Our priority will not be high interest rates. We want to increase investment, production and exports, completely eliminate chronic problems such as the current account deficit or foreign debt, and also raise the level of employment and wages, Minister Nebati said yesterday. As he added, an urgent task for the authorities is to protect people with fixed incomes (e.g. pensioners) from the negative effects of inflation.
The president himself also strongly emphasizes the issue of strengthening exports. In yesterday’s Twitter post, Erdogan bragged about the latest data.
– In November, our exports increased by 33.44 percent. annually, up to $ 21.5 billion. During the year, exports reached USD 221 billion. We will work harder, produce more and continue to grow – wrote the politician.
Bugün açıklanan dış ticaret verilerine göre Kasım ayı ihracatımız geçen yılın aynı ayına oranla% 33.44 artarak 21.5 million dollar olarak gerçekleşti. Yıllık bazda ihracatımız will give 221 million dollars ulaştı.
Daha çok çalışacağız, daha çok üreteceğiz, daha çok büyüyeceğiz. 🇹🇷 pic.twitter.com/jKP0Q1g32W
– Recep Tayyip Erdoğan (@RTErdogan) December 2, 2021
The next elections in Turkey will not take place until 2023 (both parliamentary and presidential). This fact distinguishes this country from Russia, the Czech Republic and Hungary, where the elections are a matter of the coming months and where central banks sharply raised interest rates precisely due to rising inflation. Despite this, the polls already show the loss of support for the current ruling party.
In a survey conducted by XXX on a sample of 2,507 Turkish citizens on November 13-20, support for the president dropped to 26 percent, while in the summer he had over 40 percent. This poll is also the newest and the harshest for Erdogan, but even in a broader sense it can be seen that the trend in the polls of the Justice and Development Party (AKP) candidate is clearly downward.
At the same time, a large percentage of Turkish society (from 20% to 30%, depending on the pair of candidates surveyed in the hypothetical second round of the presidential election) are undecided and their votes determine the results. Issues related to managing the inflation and currency collapse may be key, as as much as 47.3 percent Turks consider them the number one problem in the country. Moreover, unemployment was second on the list emerging from the Optimar survey (16.5%).
The publication of today’s inflation data did not change the situation in the USD / TRY pair. The Turkish lira continues to weaken – one dollar is traded at TRY 13.725. The lack of any signals of a change in the policy forced by Erdogan and the company means that another interest rate cut can be expected on December 16, at the last decision-making meeting of the Turkish monetary authorities this year.