Turkey’s war on inflation: ‘Prices are changing every day and everyone is afraid’ | Inflation

Fn behind the counter of a bakery in Kasımpaşa, a working-class district of Istanbul, Mustafa Kafadar can see the orange, white and blue banners of Recep Tayyip Erdoğan’s Justice and Development Party (AKP) blowing in the spring breeze.

Kafadar has been forced out of retirement by Turkey’s economic crisis – his pension is no longer enough to cover his basic expenses. Now he works shifts at the bakery, where he describes living payday to payday as he sweeps crumbs from a tray.

“Everything is very expensive. Once I’ve bought my essentials and paid my bills, there’s nothing left,” he says.

When asked who is responsible, he laughs darkly. “You know who makes inflation high,” he says cryptically, reluctant to voice his opinion directly on Erdoğan’s economic policies. “Not me, not you, not someone on the street – but who?” Kafadar requested that his name be changed for his safety.

Turkey is going through an unprecedented financial crisis. After the lira lost half of its value last year alone, the country is now struggling with runaway inflation, officially at 61.14%.

Kafadar arranges rows of delicate breakfast pastries – fluffy rounds opening stuffed with olives or chocolate, Patty and shiny Pastry shop rolls – as customers arrive. He tells me that they sometimes get mad at him about prices. Jars of pink and white sugared almonds and an entire counter of elegant layered cakes, decorated with fruit and chocolate, remain intact, now a little too expensive for most.

“The prices of sugar and wheat have increased. A one kilogram sack of flour was worth 110 liras [£6.15] back in January; now it’s 220 lire,” he says. Pointing to some of the cheapest rolls, he adds: “We couldn’t price the Pastry shop higher, because people can’t afford it.

When Turkey’s official inflation rate topped 50% in February, it represented both a two-decade high and a huge political problem for the government. Finance Minister Nureddin Nebati earlier this month insisted the surge was “temporary”, while Erdoğan recently promised to protect Turks against inflation.

“As Turkey’s economy prepares to become one of the world’s top 10 economies, we said that we would not waste this opportunity with careless and thoughtless measures,” he said. “We will get out of this situation in a way that will not crush our citizens with inflation.”

A vendor wearing hygienic rubber gloves gestures with both hands to a customer holding a large piece of cheese at a market stall
Buying cheese on a street in Istanbul: the official inflation rate is now 61.14%. Photograph: Burak Kara/Getty Images

The runaway inflation is linked to the government’s efforts to radically reform Turkey’s economy, keeping interest rates low in the hope that this will boost it and increase output – against the advice of most experts. There have also been frequent changes in key central bank staff – Turkey has now had four central bank chiefs in three years.

“Yes, everyone experiences inflation in the world, but Turkey experiences it at almost four or five times the rate of others,” says Alp Erinç Yeldan, an economist at Kadir Has University in Istanbul.

“This is after a series of policy mistakes and ambitious expansionary plans, including following an economic policy that defies the rules of gravity.”

The inflation rate has become a political issue in itself: in January, Erdoğan sacked the head of TÜİK, the country’s official statistics agency, angered that official inflation data for the last year had hit a low. record level. Independent economic research group Enag, which monitors Turkey’s inflation rate using the same metrics as the government, calculates actual inflation was 142.63% in March. “One hundred and forty-two percent is hyperinflation, there’s no doubt about it.” Yeldan said. Since the rise in prices began to be felt last September, Enag’s calculations of actual inflation have always been double the official rate, he adds.

Turkey’s financial crisis was further aggravated by Russia’s invasion of Ukraine, which drove up global food prices, especially for wheat. The fall of the pound against the dollar was already affecting Turkey’s ability to import wheat, but the loss of Ukrainian supplies forced it to find alternatives, including drawing on its own reserves.

“I paid an electricity bill of 1,000 lira in February just for these two machines,” says Mehmet Aslan, pointing to two refrigerators containing sausages, cheese and rounds of plump yellow butter from the city ​​of Rize, where his family is from (as Erdoğan does). Last Ramadan, Aslan says his store brought in between 6,000 and 7,000 liras a day in sales; this year he is lucky if he breaks 1,500 lire.

“People make prizes,” he adds, showing a large jar of honey. “I might just earn these 400 liras [£21] and no one would say anything. I could even make 500.

Close-up of President Erdogan in a blue suit and tie looking at someone off camera
Erdoğan administration determined to keep interest rates low Photograph: Adem Altan/AFP/Getty Images

Still, Aslan is reluctant to blame the government for the current situation. “Inflation is now out of government control,” he says. “I am not satisfied with the prices. I blame the population – it is beyond Erdoğan’s control and everyone is trying to bring him down.

Turkey’s efforts to find a diplomatic solution to the war in Ukraine – catapulting Erdoğan onto the world stage as a statesman rather than an aspiring autocrat – have helped deflect some of the criticism. His personal approval rating rose in March to 43.3%, while the AKP’s vote share rose 3%, according to polling firm Metropoll.

Yet polls also showed that more than half – 53.6% – of Turkish citizens barely managed to meet their basic needs last May, while a quarter said they could not cover essential expenses. Earlier this year, delivery workers and supermarkets staged prolonged strikes to demand pay rises in line with inflation.

Energy costs in Turkey began to rise earlier this year, but, as with the price of wheat, Russia’s invasion of Ukraine sent them skyrocketing. Turkey imports about a third of its gas from Russia. State-owned gas pipeline operator Botas said this month the price of gas for power generation would rise by almost 45%, with prices rising 50% for industry and 35% for households .

As prices rose, Kemal Kılıçdaroğlu, the leader of the Republican People’s Party (CHP), said on camera that he would not pay his own electricity bill until Erdoğan lowered prices. AKP officials called it a “provocation”.

Ordinary Turks remain “concerned about the economy”, says Ekrem Cunedioğlu, an economist for the opposition İyi party. He hopes to persuade the Turkish public that he can fix the economy as elections, which are due by 2023 or earlier, begin to loom. “What we see from the data is an increase in deep poverty, meaning incomes are not meeting basic needs. will be more difficult to resolve.

Pınar Duru, who runs a boutique bakery in Istanbul’s wealthy Cihangir district, says she started baking bread only to order and opening her shop at reduced hours to cut energy costs.

“From October, inflation started to hit hard,” she says. “I make brioche, and the price of everything, eggs, flour, sugar, butter… suddenly went up. It’s still the case, on a daily basis – one day I’m checking the price of eggs, and the next day it’s different.

Turkey’s efforts to find a solution in Ukraine, and potentially drive down food prices in the process, provide little comfort, Duru adds. “It brings me neither comfort nor distraction – I live with the prices of my usual life, and so do my friends. Yes, we are talking about the war, but right now all we are talking about is war. ‘inflation,” she says. Prices change daily and everyone is afraid for their future, she adds. “Unless I see the dollar go down, I won’t feel comfortable or secure. security.”

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