Annual inflation hits 26-month high as experts warn of hyperinflation
The Turkish Statistical Institute (TÜİK) has released its July inflation figures, showing an increase from 17.53 percent to 18.95 percent. Annual inflation reached its highest level in 26 months and monthly inflation reached its highest level in 18 years.
K. Murat Yıldız / Duvar English
The July inflation figures were released by the Turkish Statistical Institute (TÜİK). Consumer inflation surpassed expectations in July, increasing to 18.95 percent from 17.53 percent in June. Annual inflation reached its highest level in 26 months and monthly inflation reached its highest level in 18 years.
In July 2021, the consumer price index (CPI) increased by 1.80 percent compared to the previous month, 10.41 percent compared to December the previous year, 18.95 percent compared to the same month the previous year, and 15.15 percent compared to the twelve-month averages as the market expected an annual increase of 18.7 percent, according to economists as the inflation expectation rose from 14.46 percent to 15.64 percent in the Central Bank's July survey.
On the other hand, producer inflation (D-PPI) increased by 2.46 percent on a monthly basis and 44.92 percent on an annual basis while annual inflation reached its highest level in 26 months, and monthly inflation peaked to its highest level in the last 18 years.
Despite that inflation exceeded expectations, the dollar/TL exchange rate dropped. The exchange rate, which began the day at 8.35 and briefly reached 8.38 before the release of the inflation data, then fell below 8.30.
Food inflation major problem
Food and non-alcoholic beverages recorded a 24.92 percent increase, transportation had a 24.62 percent increase, and household goods had a 22.70 percent increase, respectively, compared to the same month the previous year.
The alcoholic beverages and tobacco group saw the smallest increase with 1.80 percent. Communication, clothing and shoes, and education, with 4.41 percent, 8.54 percent, and 10.61 percent, respectively, were the other groups with lower increases compared to the same month the previous year.
Housing on top in monthly increase
Housing had the highest monthly increase of 5.07 percent, food and non-alcoholic beverages had 2.77 percent, and restaurants and hotels had 2.72 percent, respectively, in July 2021.
In July 2021, the CPI, excluding unprocessed food, energy, alcoholic beverages, tobacco, and gold, increased by 1.00 percent from the previous month, 10.17 percent from December of the previous year, 18.51 percent from the same month the previous year, and 15.54 percent from the twelve-month averages.
The product with the highest price increase in July compared to the previous month was "domestic tours of one week or more" with an increase of 29.42 percent.
Overall in TÜİK’s inflation basket, the average price of 81 out of 415 products decreased. The average price of 50 items stayed the same, while the average price of 284 items increased.
TÜİK’s data not convincing
Experts have long argued that the inflation rate is much higher than the official numbers announced by the government. According to TÜİK’s data, food inflation is at 24.92 while the United Public-Business Confederation Research and Development Center (KAMUAR) in its recently published report noted that in July, basic food prices increased by 4.2 percent on a monthly basis and by 35.7 percent on an annual basis.
Moreover, according to the monthly research conducted by ENAGrup (Inflation Research Group), a group of independent experts and academics, monthly inflation, which TÜİK reported as 1.80 percent in July, is actually at least 4.89 percent, in other words, 2.7 times higher.
‘Face the facts and take action’
“In Turkey, we need to talk about hyperinflation and take precautions. Food prices that used to fall in the summer no longer do so due to structural issues. Our industrial and agricultural policies must be tweaked at the same time,” Professor Dr. Veysel Ulusoy of ENAGrup told Duvar English, adding that these should have been done a long time ago.
“Agriculture is a big problem. Farmers are struggling and hopeless. Not only farmers; the rising cost of raw materials, logistics, and heavy taxes hit our industry hard as well,” Ulusoy added.
Main opposition Republican People's Party (CHP) vice chair Veli Ağbaba in a written statement two weeks ago announced that a total of 47,572 shopkeepers went bankrupt in the first six months of 2021.
“Bankruptcies occur when the difference between PPI and CPI is large. We don't know how many bankruptcies occurred during the pandemic because this information isn't publicly available and bankruptcies are illegal. This structural issue has been plaguing us for more than 1.5 years. Authorities must face the facts and take appropriate action. They are already too late,” Ulusoy said.