Annual inflation in Turkey jumped far beyond expectations and amounted to 36.08% in December at an annual rate compared to analysts’ expectations, which ranged from 26.4% to 37.3%, averaging 30.6%. This is the highest rate since September 2002, even before President Erdogan’s party came to power. Inflation reflects the crisis around the pound that has been crashing over the past year.
According to the Central Bureau of Statistics, consumer prices have risen by 13.58% in the last month, compared to a forecast published by Reuters which stood at only 9%. Turkey’s central bank expected inflation to be 18.4%. Inflation in Turkey for most of the past five years has stood at a double-digit rate, much higher than in parallel emerging markets.
The main cause of the inflation outbreak is the collapse of the Turkish lira by 44% in the last year. Following the inflation data released last night, the pound continues its journey south with a 3% drop from yesterday to £ 13.6 per dollar, a slight recovery from the price of £ 13.92 it reached earlier. The low price of the pound against the dollar reached 18.4 last December, before President Erdogan announced state backing for deposits in pounds that would insure them against a possible drop in value. The extraordinary move managed to help slightly restore the value of the Turkish lira in the markets.
Manufacturers are suffering even more, with the manufacturer’s recognition index rising by 19.08% in the last month, bringing the annual increase to 79.89%. The high index is due to a jump in import prices due to the weakening of the national currency. Rising prices for producers are ultimately mostly rolled out to consumers, which probably implies a continued trajectory of the rise in inflation in Turkey in the coming months as well.
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