Turkey’s inflation soared highest in AKP rule

Turkey’s annual inflation has soared to its highest since the ruling Justice and Development Party (AKP) came to power in 2002, as Turkish Statistical Institute (TÜİK) data shows a 13.58 percent increase in Consumer Price Index (CPI) in December and calculated the annual inflation rate as 36.08 percent. 

According to official statistical institute data, the Producer Price Index (PPI) rose 19.08 percent monthly and 79.89 percent annually. 

Turkish Lira has lost almost 45 percent of its value last year after the Central Bank (CBRT) continued cutting interest rates as President Tayyip Erdoğan defends an economic policy to prioritize credit and exports over currency stability. Following the president’s low-interest policy, the bank slashed the policy rate to 14 from 19 percent since September, causing historic fell of the Lira against foreign currencies. 

Erdoğan: “global commodity price hike is the reason”

Following the cabinet meeting on Jan. 3, Erdoğan stated that the ruling party has “taken the fact that inflation soared in such level with sadness.” The president pointed to the global surge in commodity prices and currency fluctuations as the real cause of the high inflation rates and stated that his government is “confident that they will decrease the inflation to one digit.”

“No matter what reason, we are deeply sorry that our people have to face this,” he said.

On the other hand, opposition parties criticized the economic policies of the AKP administration led by Erdoğan, stating that the official figures declared by the TÜİK do not reflect the accelerating surge in prices and drop in the lira.

Record inflation of AKP rule

As the Lira hit a record low against the US Dollars and touched 18,4 in December 17, Erdoğan announced a series of financial moves to take currency fluctuation under control on December 20. However, even though the announcement caused a rebound in the following two weeks, it fell a further 4 percent to 13.7 against the dollar on January 3. 

The CPI rates recorded the highest since the 37 percent reading of September 2002, when ruling AKP had come to power. Then, the annual consumer index reading was 29.7 percent, and the producer index was 30.8 percent that year.

With the currency crisis and inflation, Turkey saw significant price hikes in the first days of 2022. Electricity prices increased by 50 to 130 percent; natural gas increased by 25 percent in residences and 50 percent in industrial production. In addition, gasoline, diesel prices also have been raised. As it will be reflected on consumer prices, the subsequent accelerating surge will have a significant effect on Turkish households’ incomes, as it was already in decline in the last month of 2021. 

Wages diminish

The wage increases of civil servants, which are determined every year according to the previous year’s inflation rate, were also calculated after the 2021 inflation was declared.
While the 2021 reading of inflation was 36 percent, Erdogan announced after the cabinet meeting that civil servants salaries to be increased 30,5 percent. Erdoğan added, “No pensioner’s salary will be less than 2,500 TL (app. $191 as of Jan. 3) per month.”

In December, the Minimum Wage Commission had increased the net minimum wage by 50 percent for 2022 and determined it to be 4253 lira (app. $327 as of Jan.3) per month. In addition government announced that they remove income and stamp taxes were from the minimum wage. This rate was higher than the November inflation rate announced by TUİK, however, TÜİK’s numbers were criticized on the grounds that it did not reflect the truth, and the reliability of TÜİK became the subject of discussion.

According to independent “Inflation Research Group” (ENAGroup), a group of economists and academics and calculates inflation in Turkey on an hourly, daily and monthly basis, the December CPI rate increased by 19.35 percent in December. The group calculated the last 12 months increase rate, calculated with daily price changes, (ENAGgroup Consumer Price Index) as 82.81.  The İstanbul Metropolitan Municipality announced that the cost of living in the metropole soared 50 percent in a year. 

Collective bargaining stuck

Turkey’s labour unions cannot agree in the collective bargaining process quoting inconsistency between TÜİK data and the price hikes.

Last week, Turk Metal Workers Union, which represents over 130 thousand workers in the industry, organized public demonstrations around Turkey. During the protest held in Izmit on Jan. 2, Union’s president Pevrul Kavlak criticized TÜİK and stated that the inflation figures do not match with price hikes.

“We face the unrealistic figures you have declared on the collective bargaining table. Because of those unrealistic numbers you announced, the bread on our table is getting smaller and we are getting poorer,” he said.

The industrialists union had proposed an increase of 12 percent for the 6 months and an increase in the inflation rate for the other six months.

Public Workers’ Union KESK also protested TÜİK in front of the institution’s headquarter in Ankara on Jan. 3, claiming that the official inflation rates do not correspond to the price hikes of 2021.

KESK Ankara Branches Platform Spokesperson Osman Özyurt said, “Official data has no value for the public, especially for public workers, workers and retirees. Because TUIK has for a long time made the salaries and wages of working people a tool of wage suppression and low wage/salary policies.”