The annual inflation, which hit 36.1% in December, exceeded the year-end targets of the Central Bank and tested its highest levels after 2002. The economy world estimates the figure to see higher levels due to insufficiency in the country’s implemented economic policies to respond to inflation, foreign exchange rates, and some different price factors. For instance, the U.S.-based multinational investment bank Goldman Sachs estimates the inflation to exceed 40% in the first quarter of 2022 (Q1) and remain at the same level for a large part of the year.
Moreover, the real interest rate, which is quite below compared to the other developing countries, stands at 22.1% now. The situation isn’t expected to naturally normalize without changing the perspective in an environment, where countries increase the interest rate to comply with the fight against inflation and tightening financial conditions across the world, according to Enver Erkan, Chief Economist of Tera Yatirim. The inflation surge may pave the way for the negative real rates of return, which complicate holding TRY savings, to further deepen.
On the opposition side, the Republican People’s Party (CHP) Spokesperson Faik Oztrak said the monthly inflation rose by 19.35% in December while the overall inflation saw 82.81% in 2021 in line with the figures of the Inflation Research Group consisting of independent economists. “The price hike in the New Year’s Eve hasn’t been reflected on inflation yet. That’s why the peak hasn’t been seen. Unfortunately, inflation will continue to rise considering the winter season and the surge in electricity and natural gas prices,” said Oztrak.
On the other hand, the December inflation has also clarified wage increases for civil servants and retirees. Following the Cabinet meeting yesterday, President Recep Tayyip Erdogan announced that the wage of civil servants was raised by 30.5% with a 2.5% additional increase. Thus, the lowest wage of civil servants, retired civil servants, and other retirees rose to TRY 6,429, TRY 4,289, and TRY 2,500, respectively.
The Central Bank will release the Real Effective Exchange Rate for December (2.30 pm).