Turkey’s annual inflation rate surged to 36.1% last month, its highest in the 19 years that President Tayyip Erdogan has ruled, laying bare the depths of a currency crisis engineered by the president’s unorthodox interest-rate-cutting policies.
In December alone, consumer prices took a rare step into double digits, rising 13.58%, Turkish Statistical Institute data showed this week, eating deeper into the earnings and savings of Turks rattled by the economic turmoil.
Turkey's lira shed 44% of its value last year as the central bank slashed interest rates under a drive by Erdogan to prioritise credit and exports over currency and price stability.
Some economists predict inflation could reach as high as 50% by the second quarter unless the direction of monetary policy is reversed.
Turkey now has the eighth-highest inflation in the world, according to a Trading Economics listing.
Last year was the worst for the lira in nearly two decades, while the annual CPI was the highest since the 37% reading of September 2002, two months before Erdogan's AK Party first took office.
Erdogan's focus on Monday was on trade data which showed exports surged by a third to $225bn (about R3.6-trillion) last year. “We have only one concern: exports, exports and exports,” he said in a speech, adding the trade data showed a sixfold rise in exports during his tenure as leader.
Later, Erdogan said he was “saddened” that Turks had to face such high inflation levels, pledging to bring it down to single digits as soon as possible.
To support the currency and replenish its depleted reserves, the central bank said on Monday it had asked exporters to sell 25% of their hard-currency revenues to the bank for lira.
The bank has slashed the policy rate to 14% from 19% since September, leaving Turkey with deeply negative real yields that have spooked savers and investors.
The subsequent accelerating surge in prices and drop in the lira have also upended household and company budgets, scuttled travel plans and left many Turks scrambling to cut costs. Many queued last month for subsidised bread in Istanbul, where the municipality says the cost of living is up 50% in a year. — Reuters
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