A group of independent economists led by Professor Veysel Ulusoy, who looks at 7 million pieces of data every month, has warned that the real situation could be worse than the official figures indicate. They claim inflation reached a staggering 175 percent last month, much higher than the official figures released… discredited by foreign investors.
Even foreign multinationals are struggling to keep up with Apple by raising the price of their iPhone smartphones twice in the past three months.
Turkish President Recep Tayyip Erdogan has largely discredited official statistics, with religion now seen by some as the driving force behind economic policy.
Erdogan has blamed a wide variety of groups for the massive price hikes, including foreigners, supermarkets and egg producers who he says are colluding to raise prices.
However, Professor Ulusoy argues that the real reason is the Turkish president’s “irrational” interest rate policy.
He said: “Inflation has been the biggest problem of the Turkish economy for years.
“The biggest factor is [Erdogan’s] irrational interest rate policy.
“Since October 2021, change in daily price volatility has become more common.”
Jason Tuvey, an emerging markets economist at Capital Economics, agreed, arguing that Turkey’s inflation “is a reflection of President Erdogan’s damaging policies” and his “desire for low interest rates.”
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While most central banks around the world are raising interest rates to curb inflation, the Turkish president is doing just the opposite, in spite of the conventional economy.
Erdogan has forced the Turkish Central Bank to cut interest rates, which has increased inflationary pressures.
He has also labeled interest rates the “mother of all evil” and has justified the cuts on religion.
Economists are also concerned about massive increases in the minimum wage to mitigate the impact of inflation, fearing that rising wages will push prices even further.
Professor Refet Gurkaynak, an economist at Bilkent University in Ankara, argues that “high inflation in Turkey predates” the current global price hike and that prices are rising faster than in Europe.
He said: “Turkey’s Central Bank is lowering interest rates under political pressure, putting gasoline on the fire.
“Given the policy, it’s no surprise that inflation in Turkey is spiraling out of control.”