Every year begins with a breakthrough; every year certain thresholds are crossed; great achievements are made in the economy, in technology, and democratization is constantly making progress.
This is all well and good, but even if realized, don’t these promises amount to a veiled confession?
“We’ve been stagnating in these areas for years, in fact, we’ve even gone backwards in some areas, and now we’re going to make up for it.”
Think about it… What does it mean to reduce inflation? In order to reduce inflation, inflation has to be high.
And who brought inflation to levels that need to be brought down? In the 2023 elections, did the government change and AKP became the new government and we don’t know about it?
Eleven years of single-digit inflation
Annual inflation was below 10 percent in eleven years of the 2004-2016 period. Only 10.06 percent in 2008 and 10.45 percent in 2011 slightly exceeded the 10 percent threshold.
Then the years of searching for single-digit levels began. Especially with the great economic experiment in 2021, we saw 85 percent on an annual basis for a while in 2022, and now we are happy that we will stay at 65 percent.
But an annual rate of around 70-75 percent is again on the horizon. This is the Central Bank’s forecast; inflation will reach these levels in May and then start to fall.
This government was the one that kept inflation in single digits for years, and the one that broke records, and the one that now promises “We will reduce inflation”…
There is one more perception that needs to be shattered
Of course, no one expects a large segment of society to be financially literate. But we have a right to expect them to at least understand that the decline in the annual inflation rate is not a decline in prices.
A little logic is enough to understand this difference.
There is no need to do long calculations for this. It is enough to look at the money coming out of the pockets and to put aside sympathy for those who caused the hikes, in other words, to be a little realistic.
Politicians, rightly from their point of view, want to perceive the fall in inflation as if prices are falling, and they make propaganda to that effect.
It is not necessary to be financially literate at all to realize that this is not true; a little logic is enough.
Even if it goes down from 65 to 36…
Tomorrow we will know what the price increase in December 2023 is, and therefore what the increase for the whole of 2023 is. It will probably be 3 percent in December and 65 percent on an annualized basis. As I mentioned before, the annual rate could be 64 or 66 instead of 65; it doesn’t really matter.
The projected year-end rate for 2024 is 36 percent. Although it is difficult to keep this projection and a realization above 40 percent is more realistic, let’s assume that 36 percent is kept.
The consumer price index calculated by TurkStat will probably be 1862 in December last year. You can take this value as any of your expenditures; the monthly gasoline cost of your car, your cigarette money, the natural gas expenditure of your house, you name it…
According to projections, the monthly index will reach 2276 in May and annual inflation will hit 75 percent.
After that, the rate of increase will slow down, but the index, i.e. your spending, will continue to rise. By the end of 2024, when the increase drops to 36 percent, even if it does, the index will be 2532.
Notice that in December 2023, your monthly expenditure was 1862 and inflation was 65 percent; by December 2024, your monthly expenditure has risen to 2532, but annual inflation has fallen to 36 percent.
More money is coming out of your pockets; you pay more for gasoline, you spend more on cigarettes, you spend more on natural gas, but the rate of increase has decreased from 65 percent to 36 percent!
Is it possible to talk about a cheapening? Only the rate of increase has slowed down, that’s all!
Increase in January could reach 5-6 percent
The consumer price increase in January last year was 6.65 percent. However, there was no significant increase in the items that are the main drivers of price increases in that month.
The dollar increase in January last year was only 0.6 percent.
In January 2023, gasoline was increased by 8 percent, diesel by 3 percent, and autogas by 0.5 percent.
Of course, we cannot know how much the exchange rate and fuel prices will increase this year. But there will be an SCT hike in fuel in the coming days.
So why did the CPI increase by 6.65 percent last year even though there were no large increases in foreign exchange and fuel oil?
Because of the automatic hikes at the beginning of the year.
Those hikes were also made at the beginning of this year, and they continue.
With the 58 percent increase in the revaluation rate, new hikes came and taxes increased. Of course, there is no such item as taxes in the CPI, but can it be said that tax increases will not be reflected in the prices of goods and services?
Wage increases and labels
After the minimum wage hike, increases for civil servants, pensioners and private sector employees are next in line.
It is a fact that there is a group of people who are looking forward to these increases. Even if the employees get a raise, there is a group of people who are waiting to increase the price of their goods and services due to the increased demand…
This is why there is always a hike wave in January and this year will be the same.
Therefore, it would not be wrong to say that this month’s consumer price increase will not be less than 5 percent and may even reach last year’s level depending on the developments during the month.