Istanbul, May 3, 2024 – Turkey’s economy is grappling with alarming inflation, which reached a record high of 69.8% in April. This represents a slight increase from March’s 68.5%, indicating that the situation is worsening despite the central bank’s aggressive rate hikes.
Key Rate Sharply Increased to 50%
The Central Bank of the Republic of Turkey (CBRT) began aggressively raising interest rates in June 2023 in an effort to curb soaring prices. The key rate was sharply increased from 8.5% to 50% after President Recep Tayyip Erdogan backed away from his long-held aversion to tight monetary policy.
Last week, the CBRT kept rates unchanged but warned that it would raise them again if inflationary pressures persist.
Erdogan’s Misguided Policy?
Erdogan has long blamed high interest rates for high inflation and advocated for a policy of lowering them to slow price growth. This ineffective strategy runs counter to established economic theory, and the CBRT’s series of rate cuts has led to double-digit inflation and a currency crisis in Turkey. Only after his re-election in May 2023 did Erdogan finally change course and embrace a tighter monetary policy.
Uncertain Future – Inflation Near 70%
Despite this shift, the situation in the Turkish economy remains tense. Inflation at nearly 70% puts a significant strain on households and businesses, and the central bank will need to urgently find effective tools to suppress it.
Turkish Economic Statistics:
- Year-on-year inflation rate: 69.8% (April 2024) – record high
- CBRT rate hike: from 8.5% to 50% (since June 2023)
- GDP growth: 5.3% (Q1 2024)
- Unemployment: 10.9% (March 2024)
- Public debt: 39.5% of GDP (2023)
- Exchange rate: 18.5 TRY/USD (May 3, 2024)
- Key exports: Automobiles, textiles, food, electronics
- Key imports: Oil, natural gas, machinery, electronics, chemicals
Sources:
- https://www.tuik.gov.tr/en/
- https://www.worldbank.org/en/home
- https://www.imf.org/en/Home
- https://tradingeconomics.com/
Notes:
- The inflation rate remains very high and is a serious problem for the Turkish economy.
- The CBRT is trying to lower inflation by raising interest rates, but this could have a negative impact on economic growth.
- The Turkish economy grew at a moderate pace in 2024, but growth is expected to slow in the coming months.
- Unemployment remains high.
- Public debt is relatively low compared to other emerging economies.
- The Turkish lira has weakened against the US dollar in recent months.
- Turkey is a major exporter and importer of goods.
It is important to note that these statistics are for informational purposes only and may change over time.
