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How much is the experience with interest rates costing President Erdogan and Turkey?

The recent economic crisis in Turkey has led to skyrocketing inflation while inflation in the country has risen by 36%. The Turkish government has also multiplied electricity and gas prices in the country. Now that inflation in Turkey has risen to 36 percent, electricity prices have risen from 50 percent to 125 percent and gas prices have risen by 25 percent per family, but in a government supporter economy, this trend has continued. Calling it 'positive' while the opposition calling it 'destructive'.

According to the reports, Turkey's annual inflation rate rose to 36.1% last month, the highest level in 19 years. Rising inflation has highlighted the effects of the currency crisis caused by Turkish President Recep Tayyip Erdogan's unconventional "interest rate cut" policies.

Turkey's energy market regulator on January 1 announced a 50% to 125% increase in electricity prices depending on usage. The country's national natural gas distributor announced a 25% increase in gas prices per family on the same day. Data from the Turkish Statistics Institute showed on Monday that in December alone, the consumer price index rose 13.5 percent, indicating that the increase had "Turkish savings and income have been swallowed up," they say, adding that the economic disaster concerns them greatly.

The Turkish lira lost 44% of its value against the dollar last year as Turkey's central bank cut interest rates under Erdogan's economic program to prioritize debt and exports over currency and price stability. The lira depreciated further against the dollar in Turkey on Monday evening.

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Fear of further inflation

Unless Turkey's monetary policy is modified, several economists predict that inflation will hit 50% by spring. The US agency said it would remain above 40 percent for most of next year.

"Interest rates should be hiked swiftly and aggressively because they are desperately required," said Ozelm, a founding partner of Istanbul-based Spin Consulting. However, the central bank is unlikely to do so, Ozlam said, adding that annual inflation would "likely reach 40% to 50% by March" when the rise in administrative prices was included. Will be given, including a 50% increase in the minimum wage. Compared to two months before Erdogan's AK Party took office for the first time, last year was the worst year for the lira in almost two decades, while the consumer price index, CPI, was 37.0 in September 2002. The percentage was the highest since reaching the lowest level.

But on Monday, Turkish President Recep Tayyip Erdogan focused on trade figures, which show that exports rose by a third last year to 22 225 billion.

Exports increased sixfold during his rule, according to trade figures. The central bank announced on Monday that it had urged exporters to sell 25% of their hard currency profits to the bank in exchange for a lira in order to stabilize the local currency and replenish its depleted reserves.

According to the reports, Erdogan, a "self-proclaimed enemy of interest rates", changed the leadership of the central bank last year. The bank has cut its policy rate from 19% to 14% since September, giving Turkey a sharp negative real product, which has frightened savers and investors.

As a result, the sharp rise in prices and the depreciation of the lira have affected domestic and company budgets thwarted travel plans, and forced many Turks to cut costs. Many people lined up for subsidized bread in Istanbul last month, with municipal officials saying the cost of living had risen by 50 percent in one year.

Turkey's bank says temporary factors are pushing up prices and predicts a volatile course for inflation, which has been around 20 percent in recent months and mostly double-digit in the last five years. Has been According to Turkey's central bank, the rate will finally settle to 18.4% in October.

The December producer price index rose 19.08% month-on-month and 79.89% year-on-year, reflecting rising import prices. Annual transportation prices rose 53.66 percent, while CPI data showed that average food prices rose 43.8 percent.

The economic crisis ahead of the elections in mid-2023 has also affected Erdogan's vote indicators and reduced his acceptance.

Following state-backed market interventions and Erdogan's announcement of a scheme to protect lira's reserves from currency fluctuations, the lira depreciated against the dollar in December before recovering sharply two weeks ago. I touched a record low of 18.4.

What do economists think?

However, the government is also playing an aggressive role in defending its policies. The Turkish television channel has commented on Turkey's "war for economic freedom" with the following points:

• The pro-Turkish media presented a positive economic outlook following the record rise in energy bills.
• Many pundits have pointed to rising electricity and natural gas prices around the world.
• Some were seen advising and warning the government on economic policies.

 

Turkey's media appears to be downplaying the seriousness of the recent rise in energy prices, while some experts have also expressed a positive view of the economy. The latest rise in gas prices is currently dominating social media and is at the top of the pro-opposition media agenda, with one article calling the situation a "nightmare".

In its January 2 headline, the newspaper covered a "new tariff" on electricity prices but did not mention an increase. The newspaper reported an increase in natural gas prices but described it in its headline as a "change".

Citing the latest increase, he said it was "inevitable" to be affected by the trend. The columnist said that President Recep Tayyip Erdogan's efforts to reduce Turkey's external dependence on energy would change in the coming years.

Other prominent voices were seen advising the government in defending its policies. A former member of parliament for the ruling party has said that energy prices in Europe were "five to six times higher".

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Turkish another columnist reiterated Tayyar's view on global energy prices, but added that the government had made a "strategic mistake." We have been discussing price increases since August," he said, adding that the government had helped raise the minimum wage by 50 percent in December and the value of the lira against foreign currencies. The answer was with a new scheme.

Gas and energy supplies are under pressure worldwide. In recent months, energy costs have skyrocketed. The Leading columnist, discussed the country's economy in more detail, saying that despite a partial decline in the exchange rate, prices in supermarkets did not fall. His comments appear to echo the government's argument that "opportunists" and "hoarders" are responsible for higher prices in many areas. The columnist stated, "The new Turkish economic model is highly significant." But he urged officials to adhere to the "general principles of the economy" while enforcing it.

President Erdogan is a staunch defender of the unconventional view that higher interest rates will lead to higher inflation. Their "new economic model" aims to increase production and investment while keeping interest rates low.

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