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, independent estimates by Turkish economists showed that prices have more than doubled.
The inflation rate reported by Turkey’s state statistics agency was the highest since emerging markets suffered a currency meltdown during a global financial crisis in 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 recent troubles 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’s official data is becoming a hot political issue ahead of next year’s parliamentary elections – widely seen as the toughest of Erdogan’s two decades of rule.
Opposition leader Kemal Kilicdaroglu accused the state statistics office of “lying”.
“Stop committing crimes in favor of President Erdogan,” Kilicdaroglu told the agency on Twitter.
A poll released Friday by polling firm Metropol found that 69 percent of respondents believe ENAG’s unofficial figure, compared to just 24 percent of the government’s reported figure.
– “Cost of Living Problem” –
Erodgan has doubled down on his economic approach, hinting that he might want the benchmark interest rate to go even lower in the coming months.
He has also attempted to reverse the accompanying decline in his public support by announcing a rapid series of wage increases to broad sections of the population.
He has raised the minimum wage of around 40 percent of working Turks from 2,826 liras at the end of December to 5,500 liras ($325) this month.
The wage is used as a measure of a variety of social benefits throughout the economy.
Economists warn that a significant increase in wages for so many people is an inflationary measure that should be accompanied by interest rate hikes or other means of restraining spending.
But Erdogan rejects the mere notion that Turkey is suffering from inflation.
“We don’t have an inflation problem. We have a cost of living problem,” Erdogan said last month.
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