Inflation rises to record levels in Turkey and Erdogan defends his economic policies before visiting Saudi Arabia

The Turkish Statistical Office said consumer prices rose by 36.1 percent last month compared to the same period in 2020, the highest figure since October 2002 when inflation hit 33.45% before President Recep Tayyip Erdogan’s party came to power, and is also higher Seven times the primary goal of the government. Thus, inflation due to the collapse of the Turkish lira against the US dollar reaches unprecedented levels since the stifling economic crisis that Turkey witnessed in 2001, while Erdogan continues to defend his economic policies represented in the continuous reduction of interest rates on the lira, before an expected visit to Saudi Arabia next month.

Turkish President Recep Tayyip Erdogan continues to defend his economic options a year and a half before organizing the next presidential elections, while official data showed on Monday that inflation in the country reached its highest level since 2002 due to a crisis Turkish lira.

Consumer goods prices rose by 36.1 percent last month compared to the same period in 2020, after the increase was 21.3 percent in November, according to the Turkish Statistical Office.

This figure is the highest since October 2002 when inflation reached 33.45 percent before Erdogan’s party came to power, and it is also seven times higher than the government’s primary target.

Erdogan’s continued success is often attributed to the development and prosperity that his government contributed to achieving after the economic crisis that Turkey faced in 2001.

His Islamist-rooted Justice and Development Party (AKP) came to power in the year following the crisis, leading to Erdogan’s control of Turkish politics for the past two decades, as prime minister and then president.

But he faces obstacles in the path of his re-election in the elections scheduled for mid-2023, as shown by opinion polls.

Opinion polls show that he will lose in the second round against most of the main rivals, and his ruling coalition will lose control of Parliament to a group of opposition parties that are growing in popularity.

visit Saudi Arabia

In an attempt to untie the Turkish economy, President Recep Tayyip Erdogan said Monday that he will visit Saudi Arabia next month, his first visit since the killing of Saudi journalist Jamal Khashoggi at the kingdom’s embassy in Istanbul in 2018.

“They expect my arrival in February. They made a promise and I will visit Saudi Arabia in February,” Erdogan told an unnamed woman who asked him about the problems Turkish exporters had with Saudi customs on the sidelines of a trade event in Istanbul.

The difficult relations between Turkey and Saudi Arabia worsened dramatically after the brutal murder of Jamal Khashoggi in the Saudi Consulate in Istanbul on October 2, 2018.

Jamal Khashoggi, who was close to the Saudi leadership and then became a critic of it, was killed at the headquarters of his country’s consulate in Istanbul, by a team that came from the Kingdom. The team strangled him and dismembered his body, which was not found, in a case that tarnished the reputation of Saudi Crown Prince Mohammed bin Salman, despite his strong denials of any involvement in it.

Erdogan at the time blamed senior Saudi officials but never named the crown prince.

In the years since the incident, the kingdom has sought to unofficially put pressure on the Turkish economy, which already suffered a crisis in 2018.

Calls were made for the Saudis to avoid visiting Turkey and buying real estate there, while Turkish exporters complained about delays in Saudi customs in 2020.

But Turkey has been trying for two years to repair relations with its regional rivals, including Egypt and Saudi Arabia.

Pledge to reduce inflation

Realizing the damage inflation has caused to the economy and its popularity levels, Erdogan vowed after the cabinet meeting on Monday afternoon to “reduce inflation below 10 percent as soon as possible.”

The Turkish president rejects high interest rates, which he sees as a drag on economic activity and slow growth.

But central banks raise key interest rates out of necessity when inflation gets out of control.

On Monday, Erdogan accused “the elites” of making profits from “interest revenue” and reiterated his pledge not to increase borrowing costs.

To support the lira, the authorities called on the two exporters to transfer 25 percent of the volume of their exports, in euros, dollars or sterling, to the Turkish Central Bank.

The Turkish lira lost 44 percent of its value against the dollar in 2021, with losses increasing at the end of last year when Erdogan launched a series of sharp interest rate cuts.

The dollar rose to a historic record high of about 18.4 Turkish liras, coinciding with Erdogan’s announcement of new measures to support the currency last month.

Since then, the exchange rate has improved to about 13 lira against the dollar, although the Turkish currency lost an additional 2% of its value after the recent inflation figures were revealed, before making up for most of the day’s losses before 13:00 GMT.

The dollar was equivalent to 7.4 pounds at the beginning of the year 2021.

Emerging markets economist Timothy Ash of BlueBay Asset Management described Erdogan’s economic policies as “simply disastrous”.

Questions about the data

Inflation has become an explosive political issue in the country, with the opposition in recent months accusing the National Statistics Office of deliberately and broadly underestimating the price hikes.

It refers to separate readings prepared by independent economic institutes such as the “Inflation Research Group”, which calculated the annual inflation rate for the past month at 82.8 percent.

Official readings show that the prices of most basic foodstuffs are rising significantly above the annual inflation rate.

The price of milk, yoghurt and vegetable oil increased by about 75% over the year, while the price of chicken increased by 86%.

Erdogan raised the minimum monthly wage by 50 percent to 4,250 lira (about $310), something economists fear could exacerbate inflation further.

His government has also sharply raised the costs of basic public services, including costs for heating, gas, and electricity.

Later on Monday, Erdogan told an unidentified woman at an event in Istanbul that he would visit Saudi Arabia next month after a November visit by Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed, during which billions of dollars of investments were announced.

This will be Erdogan’s first visit to Saudi Arabia since relations between Ankara and Riyadh were strained after the killing of Saudi journalist Jamal Khashoggi in 2018 inside the kingdom’s consulate in Istanbul.

With his push to increase exports, Erdogan will likely raise complaints from Turkish exporters about the delays they face at Saudi customs, in an effort to resolve the problem.


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