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04-04-23

Turkish Annual Inflation Eases Ahead of Elections, but Remains High

(MENAFN) Official data showed that Turkey's annual consumer price inflation dropped to 50.51 percent in March, slightly below the forecast, easing ahead of the landmark presidential and parliamentary elections on May 14. The country's inflation has been fueled by a currency crisis that pushed it to a 24-year peak above 85 percent in October 2021 before dipping to 55.2 percent in February 2022 due to a favorable base effect. The surging prices have hit household earnings and impacted President Tayyip Erdogan's popularity, making the May elections his biggest political challenge.

The lira weakened slightly against the dollar after the release of the data, touching a series of intraday record lows in recent days. In March, consumer prices rose 2.29 percent from a month earlier, which was less than predicted in a Reuters poll. The restaurant and hotel sector led the consumer price rises in March, surging 70.7 percent year-on-year, closely followed by a 67.9 percent rise in key food and non-alcoholic drink prices.

Turkey's southeast region was hit by massive earthquakes two months ago, killing more than 50,000 people and leaving millions homeless. The earthquake is expected to cost Turkey more than USD100 billion and shave one to two percentage points off its growth this year. In response, Turkey's central bank kept its policy rate steady last month after easing it to 8.5 percent to support growth and employment in the wake of the disaster.

President Erdogan has urged monetary stimulus in recent years, aiming to achieve price stability by slashing borrowing costs, boosting exports, and turning current account deficits to surpluses. The poll had forecast that consumer prices would be up 51.3 percent from a year earlier and were expected to end the year at 46.5 percent. However, the domestic producer price index was up 0.44 percent month-on-month in March for an annual rise of 62.45 percent, according to the data from the Turkish Statistical Institute.

While the slight easing of inflation in March is a positive development, it remains high and continues to impact Turkish households' earnings. The upcoming elections add further pressure on President Erdogan to address the country's inflation and economic challenges. Turkey's efforts to achieve price stability and boost exports through monetary stimulus will be crucial in the coming months to address the country's economic challenges and support its recovery.
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