High interest rate to usher in low growth and higher unemployment
Mustafa Sönmez February 3/2013 Faced with the shock of seeing the U.S. dollar hit 2.40…
A seemingly endless stream of fuel price hikes has sparked a nationwide outcry in Turkey, where the surge in global energy prices has been amplified by the depreciation of the Turkish lira, with annual inflation already at 54.4%.
Since Russia’s incursion into Ukraine on Feb. 24, Turkish consumers have struggled to keep up with the hikes on gasoline and diesel, including a string of increases announced over six days in a row this month.
Fuel prices had already risen 10% in February and 131% year-on-year, according to data by the Turkish Statistical Institute. The annual increase threatens to climb to 155% by the end of this month. Fuel hikes alone are likely to add two percentage points to monthly consumer inflation in March.
While the surge in global prices — the result of an energy crunch fueled by Russia’s invasion of Ukraine — has spared few countries in the world, it has had a snowballing impact in Turkey, whose currency lost more than 40% of its value last year, aggravating the cost of energy imports on which the country heavily relies. Turkey’s crude oil needs are almost entirely met through imports, with its energy importation bill standing at $50 billion in 2021. To top it all off, the hard-pressed government has discontinued a mechanism through which it kept fuel prices in check.