Turkey’s inflation rose to its highest level since 1998 in May, hitting 73.5 percent on an annualized basis, according to official figures released on Friday, a concern for President Recep Tayyip Erdogan as he prepares for elections next year.
Erdogan’s unconventional economic policy of pressing for lower interest rates to offset price surges has been blamed by critics for the country’s economic troubles.
Last week, the central bank refused to hike its primary rate, holding it at 14%.
Last month, rising food and energy prices pushed inflation even higher.
In May, transportation costs increased by 107.6%, while food costs increased by 91.6 percent.
Energy price hikes and production constraints have been worsened by Russia’s invasion of Ukraine and the coronavirus outbreak.
With elections in June 2023 looming, the opposition and many analysts have accused the national statistics bureau of intentionally underestimating inflation.
On Friday, the Inflation Research Group, a group of independent Turkish economists, reported that inflation had risen by 160.8 percent, more than double the official amount.
The statistics office did not publish the comprehensive list of pricing per product that it uses as a basis for its calculations, raising new worries about their accuracy.
On Twitter, economist Murat Kubilay commented, “According to my own observations, the distance between reality and what is measured has expanded this month, with the purpose of masking impoverishment.”
In the meantime, the country’s currency has lost approximately 48% of its value in the last year.
The lira’s depreciation has increased the cost of energy imports, and international investors are increasingly fleeing the once-promising emerging economy.
The Turkish lira, which was trading at 16.49 to the dollar on Friday, was further weakened by rumors of military participation in northern Syria. Over the last year, the currency has lost roughly 48% of its value.
Erdogan’s government has reacted by employing state banks to purchase liras in an attempt to stem the currency’s depreciation.
Turkey has reduced taxes on various items and provided electricity bill subsidies to low-income people, but these measures have failed to reduce inflation.
There has also been talk that the central bank will sell dollars to stop the lira from falling further.
On Twitter, Timothy Ash, emerging markets strategist at BlueBay Asset Management, warned, “If we don’t see change in policy, the country faces a structural economic collapse.”
Meanwhile, Kyiv’s envoy in Ankara said Turkish buyers were among those getting grain stolen from Ukraine, and that he has asked Turkey for assistance in identifying and apprehending those involved.
Russia and Ukraine produce roughly a third of the world’s wheat, and Russia also sells a lot of fertilizer, while Ukraine sends corn and sunflower oil.
However, since Russia invaded Ukraine, grain exports from its Black Sea ports have been halted, with around 20 million tons of grain trapped.
Ambassador Vasyl Bodnar claimed Russia was transporting stolen grains out of Crimea, which it invaded in 2014, and that Kyiv was working with Turkey and Interpol to track down the perpetrators.
“Russia is brazenly grabbing Ukrainian foodstuffs and transporting them out of the occupied Crimea.” He informed reporters in Ankara that the grains were being sent to other nations, including Turkey.
“We have made our appeal to Turkey for assistance, and we are pursuing criminal charges against individuals who are stealing and selling the grains, as suggested by the Turkish side,” he said.
The Nadezhda, Finikia, Sormivskiy, Vera, and Mikhail Nenashev were implicated in the stolen grain shipments, according to the Ukrainian Embassy in Ankara.
Reuters was unable to independently verify the assertions made by the embassy.
According to the Ukrainian Embassy in Beirut, Russia shipped 100,000 tons of stolen wheat to Syria this week. As a result of the conflict, the United Nations has proposed reopening shipping lines from Odesa and other Ukrainian ports.