Although Türkiye’s soaring inflation is set to slow in 2023, the country’s economy is not expected to emerge from the worst as growth is now on a downward trend, experts said.
Turkey’s economy recovered strongly from the COVID-19 pandemic and expanded by 11.4 percent in 2021, the highest rate in a decade.
The country’s annual inflation fell to 84.4 percent in November 2022 from a 24-year high of 85.5 percent in the previous month, slowing for the first time in 18 months, official data showed.
But immediate relief isn’t around the corner and far from it, said Baki Demirel, associate professor of economics at Yalova University.
“Inflation may fall, but that doesn’t mean wealth will increase, it will just slow price increases,” he told Xinhua.
The expert said that if wages lag behind the inflation rate, the poverty trend in Türkiye could continue and this would negatively affect the whole economy.
The Turkish government has increased the minimum wage three times since January 2021, and it now stands at 8,500 Turkish liras (US$455). However, some analysts said the wage increases could do little to ameliorate the sharp drop in purchasing power among low-income households.
“It’s the same as giving morphine to a patient with a broken leg instead of treating the fracture so the patient doesn’t feel pain,” Ozgur Demirtas, a finance professor at Istanbul’s Sabanci University, said on Twitter.
“In three months, purchasing power will be even worse than in previous years. Wages will melt away,” argued this scholar.
The Turkish government began loose monetary policy in late 2021 to boost exports and create new jobs to reduce the chronic current account deficit, compounding the local currency’s decline against hard currencies.
While inflation is expected to fall in the coming months, experts say growth will slow.
“Turkiye’s economy grew 3.9 percent year-on-year in the third quarter of 2022, declining sharply from the 7.7 percent growth performance in the second quarter, marking the beginning of a slowdown in momentum,” said Enver Erkan, chief economist at Tera in Istanbul brokerage house, Xinhua said.
“We still expect growth of 5.5 percent for 2022. Meanwhile, given the negative impact of exports and the slowdown in industry, we expect a slower growth path of 2.8 percent next year,” he added.
For most observers, the outlook for 2023 remains uncertain. Presidential and parliamentary elections are set to be held in June, when current President Recep Tayyip Erdogan and his Justice and Development Party would seek another term.
Erdogan promised that inflation would slow to around 30 percent by the end of next year.
“We expect inflation to fall below 30 percent by the end of 2023… and into single digits by 2024,” the president said Monday.
Source: Xinhua
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