Turkey’s inflation jumps to 20-year high as energy prices surge
Turkey–Turkey’s annual consumer inflation hit a 20-year high of 61.14 percent in March, according to figures released on Monday, fueled by rising energy and commodity costs as the repercussions from the Russia-Ukraine conflict compounded the impact of the lira’s depreciation last year.
Inflation has risen since last autumn, when the lira fell after the central bank (CBRT) began a 500-basis-point easing cycle, as President Tayyip Erdogan had requested. Consumer prices grew 5.46 percent month over month, according to the Statistical Institute, slightly less than the 5.7 percent anticipated in a Reuters poll. Annual consumer price inflation was predicted to be 61.5 percent.
“CBRT measures are just not working in combating inflation,” BlueBay Asset Management’s Tim Ash remarked. “In fact, I believe the general opinion is that the CBRT’s unconventional policy choices are a primary driver of inflation.” “The war in Ukraine is exacerbating the problem,” Ash continued, noting that the bank had failed to meet its annual inflation target of 5% since 2011. The lira was hardly affected by the news, falling 0.15 percent to 14.715 versus the dollar. The local currency depreciated by 44% in 2021 and another 10% this year. Under the government’s new economic agenda, which prioritizes low interest rates to increase output and exports in order to achieve a current account surplus, inflation will fall to single digits next year.
However, figures released on Monday indicated that the trade imbalance increased by 77 percent year over year to $8.24 billion in March, with a 156 percent increase in the value of energy imports, putting the current account objective in jeopardy. find out more
Inflation might reach 70 percent to 75 percent, according to Haluk Burumcekci, founder of Burumcekci Consulting, even if the lira does not weaken from its present level, only decreasing with the base effect in the last months of the year. “Maintaining the CBRT’s loose monetary policy stance will not be simple,” he said. Transportation, including gasoline costs, and education expenses both increased by 13.29 percent and 6.55 percent, respectively, driving consumer price inflation. In recent months, rising energy prices have sparked popular outrage.
Transportation costs increased by 99.12 percent on an annual basis, while food and non-alcoholic beverage costs increased by 70.33 percent. Following Russia’s invasion of Ukraine, economists raised inflation estimates internationally, with energy prices reaching multi-year highs as the West sanctioned Moscow. Almost all of Turkey’s energy is imported. The Reuters survey predicted 52.2 percent year-end inflation, up from 38 percent in the previous month’s poll. In March, producer prices increased by 9.19 percent, or 114.97 percent on an annual basis.