Turkey anti-inflation steps don’t go far enough, experts warn

ANKARA: Although Turkish inflation slowed in September, it is still raging out of control with the government avoiding difficult decisions that could help tackle it, experts told AFP.

Turkey has experienced spiralling inflation the past two years, peaking at an annual rate of 85.5 per cent in October 2022 and 75.45 per cent in May.

The government claims it slowed to 49.4 per cent in September.

But the figures are disputed by the ENAG group of independent economists who estimate that year-on-year inflation stood at 88.6 per cent in September. Finance Minister Mehmet Simsek has said Ankara was hoping to bring inflation down to 17.6 per cent by the end of 2025 and to “single digits” by 2026.

And President Recep Tayyip Erdogan recently hailed Turkey’s success in “starting the process of permanent disinflation”.

“The hard times are behind us,” he said.

But economists interviewed by AFP said the surge in consumer prices in Turkey had become “chronic” and is being exacerbated by some government policies.

“The current drop is simply due to a base effect. The price rises over the course of a month is still high, at 2.97 per cent across Turkey and 3.9 per cent in Istanbul.”

“You can’t call this a success story,” said Mehmet Sisman, economics professor at Istanbul’s Marmara University.

‘Budgetary black holes’

Spurning conventional economic practice of raising interest rates to curb inflation, Erdogan has long defended a policy of lowering rates, citing Islamic precepts that ban usury. That has sent the lira sliding, further fuelling inflation.

But after his reelection in May 2023, he gave Turkey’s Central Bank free rein to raise its main interest rate from 8.5 to 50 per cent between June 2023 and March 2024.

The central bank’s rate remained unchanged in September for the sixth consecutive month.