Turkey’s consumer prices rose 11.1% in January, bringing annual inflation to 48.7%, the highest rate in two decades, data released Thursday by the Turkish Statistical Institute (TUIK) show.

January’s inflation overshot both the forecast of Finance and Treasury Minister Nureddin Nebati, who had predicted a monthly rate of up to 8%, and the more realistic forecasts of the Central Bank.

Turkish consumers are reeling from massive price hikes at the turn of the year, including on electricity, gas, fuel, transport and food, stoked mainly by the currency turmoil last year. Nebati’s recent forecast that inflation would peak in January before easing in the ensuing months appears off the mark as well. In an omen of further price increases, annual producer inflation was almost the double consumer inflation in January. According to many observers, consumer inflation is likely to hit an annual rate of up to 70% in the coming months.

In an already shocking trend, the rate had jumped to 36% in December from 21.3 % in November and 19.9% in October. Inflation of nearly 49% has not been seen in Turkey in the past two decades. The prospect of the rate soaring to 60% and even 70% causes many to ask in fear whether Turkey is going back to the turbulent late 1990s and early 2000s. The most recent time Turkey saw similar price increases was in 2001, when annual inflation hit 68% amid a severe economic crisis that spelled the end of the coalition government and propelled President Recep Tayyip Erdogan’s Justice and Development Party to power the following year.

Food and energy prices stand out in the country’s current inflation woes, exacerbating popular grievances ahead of presidential polls next year. Turkey relies heavily on imported oil and gas to meet the energy needs of industry, commerce and households. Its energy importation bill increased by 75.5% to $50.5 billion in 2021. The country took blows not only from the rise of global energy prices, but also the depreciation of its currency, which lost about 40% of its value against the dollar last year. About half of Turkey’s energy imports in 2021 belonged to the last four months of the year, a period during which the Central Bank cut its policy rate four times, heeding Erdogan’s unconventional view that high interest rates cause high inflation. The rate cuts pushed real yields on the lira into negative territory and fueled a dizzying increase in foreign exchange prices, which in turn forced back-to-back price hikes on fuel, electricity and gas. The knock-on effect on any business using energy has meant price increases across the board.



Written by Mustafa Sönmez