Istanbul May 5 2022: Turkey’s annual inflation jumped to a two-decade high of 69.97% in April, according to data on Thursday, fuelled by the Russia-Ukraine conflict and rising energy and commodity prices after last year’s lira crash.
The surge in prices has badly strained households just over a year before presidential and parliamentary elections that could bring the curtain down on President Tayyip Erdogan’s long rule.
Erdogan first came to power as prime minister in 2003 before switching the country to a presidential system, and the unorthodox interest rate cuts made last year under pressure from him have been blamed for lighting a fire under inflation.
Month-on-month, consumer prices rose 7.25%, the Turkish Statistical Institute said, compared to a Reuters poll forecast of 6%. Annually, consumer price inflation was forecast to be 68%.
“It’s about food and energy price increases but also the spectacular failure of monetary policy in Turkey – and it’s about the abject and total failure of Erdogan’s unorthodox monetary policy,” said strategist Timothy Ash at Bluebay Asset Management.
Last year’s currency slide was triggered by a 500 basis point-easing cycle which began last September under pressure from Erdogan, prompting the sustained surge in consumer prices that was stoked by fallout from Russia’s invasion of Ukraine.
The surge in consumer prices was driven by a 105.9% leap in the transportation sector, which includes energy prices, and a 89.1% jump in food and non-alcoholic drinks prices, the data showed.
Month-on-month, food and non-alcoholic drink prices rose the most with 13.38% and house prices rose 7.43%.
The lira dipped 0.9% to 14.8525 against the dollar after the release of the data.
Presidential and parliamentary elections are due by June 2023 and opinion polls show Erdogan’s support declining.
“The really remarkable thing here is that opinion polls still suggest that the next election is still in the balance. Perhaps that says as much about the opposition as Erdogan,” Ash said.
