Although Turkey’s soaring inflation is set to drop in 2023, the country’s economy is not expected to be out of the woods as growth is now on a downward trend, experts said.
The Turkish economy bounced back strongly from the COVID-19 pandemic to expand by 11.4 percent in 2021, its highest rate in a decade.
The country’s annual inflation eased to 84.4 percent in November 2022, from a 24-year high of 85.5 percent the previous month, slowing for the first time in 18 months, official data showed.
Yet immediate relief is not around the corner, and far from it, said Baki Demirel, associate professor of economics at Yalova University.
“Inflation may decrease but this doesn’t mean that prosperity will increase, it will simply slow down price hikes,” he told Xinhua.
The expert said that Turkey’s poverty trend may continue if wages stay behind the inflation rate, and this will negatively affect the entire economy.
The Turkish government has increased the minimum wage three times since January 2021, which stand now at 8,500 Turkish liras (455 U.S. dollars). But some analysts said the hikes in wages could hardly improve low-income households’ sharp decline in purchasing power.
“It’s the same as giving Morphine to a broken leg patient instead of treating the fracture so that the patient doesn’t feel pain,” Ozgur Demirtas, a finance professor at Istanbul’s Sabanci University, said on Twitter.
“In three months, the purchasing power will be even worse than in previous years. Salaries will melt away,” this scholar argued.
The Turkish government embarked in late 2021 on a loose monetary policy to boost exports and create new jobs to lower the chronic current account deficit, which accentuated the national currency’s decline against hard currencies.
While inflation is expected to decrease in the coming months, growth is set to drop, experts said.
“Turkey’s economy grew by 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 loss of momentum,” Enver Erkan, chief economist at Istanbul’s Tera brokerage house, told Xinhua.
“We still expect a growth of 5.5 percent for 2022. Meanwhile, with the downside effects of exports and deceleration in industry, we consider a slower growth path of 2.8 percent for next year,” he added.
For most observers, the outlook for 2023 remains uncertain. Presidential and parliamentary elections are scheduled to take place in June, when the current President Recep Tayyip Erdogan and his Justice and Development Party would seek another term of office.
Erdogan promised that inflation will slow to around 30 percent by the end of next year.