Inflation should remain high this year in Turkey due to the effects of the global energy prices, Treasury and Finance Minister Nureddin Nebati said, adding that tax investigations had been opened in many sectors in light of the allegations of speculative price formations and storage.
Turkey’s annual consumer price index (CPI) rose more than expected at 54.44% in February, while the producer price the index (PPI) jumped 7.22% month-over-month in February for an annual rise of 105%.
Nebati, who commented on several topics related to Turkish economy in a meeting with the economic daily Dünya, recalled that the fight against inflation was an absolute priority.
“We are implementing our short-term, medium and long-term policy steps in this area. First of Overall, we have made significant gains by implementing place a series of instruments to prevent the exchange rate fluctuations that harm price stability,” he said.
The country’s inflation reading that hit a two-decade high was fueled by a tumble in Turkish lira late last year and higher raw material prices.
The lira weakened after the bank in September embarked on an easing cycle, which saw son policy rate be reduced by 500 base points at 14%.
the policy the easing came as government approve a new economic program who prioritizes growth, investment and exports while maintaining low rates. the government also revealed a system of protection monetary.
The lira has been broadly stable since start of the year following 44% decline in 2021 and was hovering just below 14 against the greenback.
But it exceeded the level in the last weeks with the return of volatility over The Russian War against Ukraine.
Turkey’s energy bill has skyrocketed last year like global price and demand Pink, leading Ankara will raise energy prices at start of the yearincluding a 50% increase in electricity price for lower-demand households.
Nebati mentioned that they recently reduced the value-added tax (VAT) rate on food products from 8% to 1%, also bring it down from 18% to 8% for electricity.
” These measures show our determination in the fight against inflation. In the meantime, we are continuing our studies on structural elements of inflation together with our relevant institutions in the Price Stability Committee,” he said.
Increases in energy and other commodity prices around the world in the post-coupled pandemic period with supply chain disruptions have led to an increase in inflation at the global level, the minister noted, saying that these supplies side the effects were also felt in Turkey.
“Inflation should remain high throughout 2022 due to cost pressures, the shift effect of the exchange rate and the effects of global energy price. At the end of the yearwe expect inflation decline with determined steps”, he said, explaining that once a decrease in inflation is assured, the gap between the CPI and the PPI will narrow.
Nebati went on say they will be watching closely how these steps think on price, promising to fight unfair prices that match market realities.
On the impact of the russian-ukrainian war on Turkey economy and the global economy Overall, Nebati said the reforms and policies implemented over the last 20 years have reduced the Turkish economyand helped him develop significant resistance to shocks with it’s strong public financial and banking sector.
“Thanks to this resilience, Turkey economy increased by 1.8% in 2020, when the pandemic negatively affected all world savings and global economy contracted by 3.1%, becoming one of both countries with positive growth along with China.”
“Despite the disturbances in the global supply chain, uncertainties caused by the pandemic and the rapid increase in input prices, Turkey economy increased by 11% in 2021, showing the strongest performance in the last 10 years. Thus, Turkey was the country with the highest growth rate between G-20, OECD and EU countries according to data announced,” he added.
the minister recognized that Russia’s war against Ukraine, both of who are important trade the partners for Turkey will surely have some effect on that of the country economy and the global economy, in in addition to its humanitarian devastation and social consequences.
Consequently, the price increases suffered, in particular in energy and agricultural raw materials, will exert additional pressure on the already high global inflationary environment and cause volatility in financial markets, he said, adding that a decrease in the global risk appetite and further slowdown in international capital movements are expected.
“Along with these global risks, Turkey can also be affected in foreign tourism, energy and food trade due to the size of our economic relations with Russia and Ukraine,” Nebati said.
