HIGHLIGHTS
- Turkey’s annual inflation rate has reached 36.1 percent, the highest increase in President Tayyip Erdogan’s 19 years in power.
- According to Trading Economics, Turkey ranks 8th in the ranking of countries with the highest inflation rate in the world
- According to the Turkish Statistical Institute, the consumer price index grew at a double-digit rate of 13.58 percent in December 2021.
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Inflation hits 19-year record level
As of December 2021, Turkey’s annual inflation rate has reached 36.1 percent, the highest increase in President Tayyip Erdogan’s 19 years in power. At the same time, this level of inflation has put Turkey in the 8th position in the ranking of countries with the highest inflation rates in the world, according to Trading Economics.
Moreover, record-high inflation has created a whirlwind of economic crises in Turkey. According to the Turkish Statistical Institute, the consumer price index grew at a double-digit rate of 13.58 percent in December 2021.
Transportation costs increased by nearly 54% and the price of food, beverages and household appliances increased by more than 40% compared to the same period last year. The higher import prices are reflected by the December producer price index, which increased by 19.08% compared to the previous month (equivalent to an increase of 79.89% compared to the same period last year).
The Turkish lira has lost 44% of its value since 2020 when President Erdogan ordered the central bank to cut interest rates to prioritize credit and exports over currency and price stability. The rapid rise in prices and the ensuing fall in the lira’s value drained the budgets of households and many businesses.
Conservative policy of President Recep Tayyip Erdogan
The cause of inflation is the highest level not seen in 19 years in the past 19 years because of the conservative policy of President Recep Tayyip Erdogan. He went against conventional economic policies that high interest rates would help curb inflation. When prices rose, instead of raising interest rates to encourage saving and reduce inflation, he ordered the central bank to do the opposite.
Moreover, last year, Erdogan overhauled the leadership of the central bank by firing those who opposed his economic views. Mr. Erdogan asked the Bank to cut interest rates from 19% to 14% since September 2021. This has caused Turkey to suffer from very deep negative real interest rates, causing confusion for people and businesses in the country.
Besides, President Erdogan not only did not admit his mistake, but also said that foreign intervention had caused Turkey to fall into an economic crisis. In addition, he firmly states that his strategy is helping the country to become financially independent.
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