Turkey’s annual rate of inflation has hit a 19-year high as a currency collapse sends the cost of imports soaring.
According to the Turkish Statistical Institute, consumer prices soared 36% in December compared to the same month the previous year. Prices are now rising at their fastest pace since September 2002. President Recep Tayyip Erdogan’s party came to power later that year.
The increase in prices was led by the cost of transportation soaring nearly 54% year-on-year and food and drink prices skyrocketing 43.8%. Household equipment and hospitality prices were also up more than 40% compared to a year ago.
Turkey’s currency lost more than 40% against the US dollar last year, a collapse fueled by Erdogan’s insistence that the country’s central bank pursue a highly unorthodox policy of cutting interest rates, rather than raising them, in the face of rapidly rising prices.
Erdogan has blamed Turkey’s economic woes on foreign intervention and says he is leading a struggle for more financial independence for the country.
Spiraling prices and the plunging currency have already forced the Turkish government to take extraordinary measures to try to protect workers and savers.
Last month, Erdogan announced a nearly 50% hike in the country’s minimum wage and a plan for a new type of Turkish lira deposit account that would protect savers against devaluation.
Erdogan has also urged businesses and individuals to defend the lira. “As long as we don’t take our own money as a benchmark, we are doomed to sink. The Turkish lira, our money, that is what we will go forward with. Not with foreign currency,” Erdogan said Friday in a speech to a business association in Istanbul.
“We have been working for some time now to get the Turkish economy out of the spiral of high interest rates, high inflation, and to set it on the path of growth through investment, employment, production, exportation and current account surplus,” he added.
Turkey’s central bank cut interest rates for a fourth month in a row in December. Central banks typically raise interest rates when inflation is soaring to stop the economy from overheating.