Inflation in Turkey rose to an annual rate of 78.6 percent in June – the highest in 24 years, according to official data released Monday – as President Recep Tayyip Erdogan’s unconventional economic policies continued to take their toll.
However, unofficial estimates by Turkish economists showed that prices have more than doubled.
The inflation rate reported by Turkey’s State Statistics Office was the highest since January 1998.
Inflation was 73.5 percent in May and 15.0 percent early last year.
Economy Minister Nureddin Nebati announced on Friday that consumer prices will fall in December.
“I promise you and the President that from December we will see a decrease in inflation,” he was quoted as saying by Turkish media.
According to official data, June’s surge in inflation was driven by a 123.4 percent increase in transportation costs and a 94 percent increase in soft drinks.
Turkey’s crisis began when Erdogan forced the central bank into a series of interest rate cuts last year, which he says are part of his “new economic model”.
The key interest rate fell despite rising consumer prices.
But the Turkish leader rejects conventional economics and reiterates that high interest rates push up prices.
Economists believe his approach has exacerbated the pain caused by the global surge in food and energy prices caused by Russia’s invasion of Ukraine.
– Questions about data –
However, more and more economists are beginning to question Turkey’s official data.
A monthly report released Monday by Turkey’s ENAG group of independent economists showed consumer prices rose 175 percent in June.
According to ENAG, prices have risen by 71.4 percent since the beginning of the year alone.
Istanbul Chamber of Commerce said inflation in Turkey’s largest city has reached an annual rate of 94 percent.
“No one believes official Turkish data anymore,” said BlueBay Asset Management economist Timothy Ash.
“There is no expectation of anything like a credible political response.”
Turkey on Friday raised the minimum wage significantly for the second time in a year to cushion the blow to budgets ahead of next year’s general election.
The net monthly wage increase to 5,500 lira (US$330) means the nominal minimum wage has almost doubled since late last year.
It was 2,826 lira at the end of December and 4,253 lira in January.
Economists warn that a significant increase in wages for large sections of the population is an inflationary measure that should be accompanied by interest rate hikes or other means of restraining spending.
Official data shows that more than 40 percent of Turks were earning the minimum wage earlier this year.
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