Turkey’s annual inflation rate has reached a record high for the last 19 years. Prices of food, transport, and other necessities hit over 36% in December. Most central banks of other countries raised interest rates to beat inflation. Unfortunately, Turkey went the other way.
The Value of Lira Collapses
The current situation means a collapse of the Lira as Erdogan places exports above the currency’s stability.
In addition, Erdogan claims high-interest rates are “the mother and father of all evil” and tries to use other unorthodox policies to manage prices in the country, such as intervening in foreign exchange markets.
Erdogan also stated that the country is “going through a transformation in economy and rising to the next league.” He claims Turkey has been reaping the fruits of exports and other hard work in the past 20 years.
According to some forecasts, the inflation in Turkey might reach 50% by spring unless the monetary policies change. Unfortunately, chances are the central bank will barely react.
In some parts of the country, the prices have already hit a 50% increase, based on the available pictures of people waiting in line to receive subsidized bread.
Three weeks ago, Erdogan announced a scheme that will serve to protect the converted local deposits from losses versus hard currencies. That started a sharp 50% rally, but the Lira dipped again soon.
This economic turmoil has also affected Erdogan’s opinion poll ratings for the upcoming elections.