Lunchtime in the Turkish capital Ankara. An elderly woman climbs into a blue and white collective bus, a so-called dolmus. She puts her shopping bags down, takes her wallet out of her pocket and hands the money to the driver. She’s mad. “A ride from Kizilay to me cost 2.5 Turkish lira, then the price rose to 3.5 lira, then 5 lira, now 7 lira.” The drivers couldn’t help it, she says, someone else is responsible: “It’s his fault, he drives up the prices. He should please explain why fuel is becoming more and more expensive.”
This refers to Recep Tayyip Erdogan, the Turkish President. Like many others, the pensioner does not speak his name openly – the fear of reprisals, including arrest for insulting the president, is omnipresent.
The driver of the dolmus, Salim Demirtas, understands such reactions. The family man has been working in the Turkish capital for years. He says he hasn’t seen such galloping inflation in decades. “We don’t want a price increase. People are already having trouble paying the fare. If it gets even more expensive, we will have even fewer customers.”
Ticket prices for express trains were also raised on June 13 for the fourth time this year – many citizens criticize the start of summer of all times. In January, a journey between Ankara and Istanbul cost 84 lira, now 195 lira, the equivalent of around 11 euros.
Rising energy costs and the Ukraine war are driving up prices around the world. But while the inflation rate in Germany is currently 7.9 percent, for example, it is almost tenfold in Turkey: according to official figures, it climbed to 73.5 percent in May – the highest value since 1998.
According to experts from the independent research group for inflation, ENAG, it is much higher: They assume an inflation rate of 160.8 percent. The Turkish statistical office TÜIK has filed a complaint against the ENAG with the competent public prosecutor’s office. ENAG spread data that harm the reputation of the statistical authority, it said. This is an attack on the reputation of TÜIK.
Even before Russia attacked Ukraine, the Turkish economy was going through turbulent times. The country is now in a deep crisis with the Ukraine war. State measures do not work. The minimum wage has been drastically increased and is still worth less and less, converted into euros it is 278 euros a month. One euro currently costs around 18 lira.
The prices at the petrol pumps are particularly noticeable. According to the TÜIK statistics office, transport costs, which also include petrol and diesel fuels, rose by 224 percent in May compared to the same month last year. Turkey covers almost all of its energy needs from abroad, which is why the global rise in oil and gas prices is having a particularly strong impact.
Food and non-alcoholic beverage prices nearly doubled in May, up 91.6 percent from a year ago. Many people have long had existential fears.
Financial experts, including the economist Murat Birdal from the University of Istanbul, blame the Turkish central bank for the development: The central bank is not independent and contributes significantly to inflation with its interest rate policy. He even expects a three-digit inflation rate in Turkey at the end of the year.
In fact, given the skyrocketing prices, the Turkish central bank should have tightened monetary policy and raised interest rates in the past few months, at least that’s what current economic theory recommends. But the Turkish central bank is not doing that – and is thus completely in line with President Erdogan. He claims inflation is the result of high interest rates. At a rally over the weekend, he again emphasized that his government would not raise interest rates, but would on the contrary continue to lower them.
However, Turkey only started to have major problems after the interest rate cuts in September 2021. Inflation has continued to rise unabated since then. The trade deficit recently climbed to $25.71 billion. At the same time, the Turkish currency continues to depreciate: this year it lost 23 percent against the dollar in less than six months, last year it was a total of 44 percent. With the depreciation of the lira, all imports become more expensive, especially energy and raw materials.
With his low interest rate policy, Erdogan believes he can attract foreign investment to the country and boost the economy. On Monday he promised to make Turkey one of the ten largest economies. The Central Bank follows the policy of the President. Erdogan has replaced the head of the central bank three times since 2019. The chairman of the TÜIK statistics office, which calculates the inflation rate, was also replaced at the beginning of the year.
Erdogan currently has one big goal: he wants to win the 2023 elections. He recently announced that he will run as a candidate for the People’s Alliance, an electoral alliance with the far-right Nationalist Movement Party (MHP). In Germany, the MHP is best known for its “Grey Wolves” organization, which is monitored by the Office for the Protection of the Constitution.
Erdogan knows from his own experience what effects inflation can have on election results: He founded his AKP party in the middle of the political and economic crisis in 2001, when the inflation rate was almost 70 percent. A year later, the AKP won the parliamentary elections with an overwhelming majority: With 365 of 550 seats, it brought Erdogan to power as a beacon of hope.
At the time, voters severely punished the governing parties for the serious crisis: none of the coalition partners at the time was able to clear the ten percent hurdle and enter parliament.
Mitarbeit: Batu Bozkurk, Emre Eser
Autor: Diamond Gunner
The original of this article “Why the inflation rate is exploding under Erdogan” comes from Deutsche Welle.
