Inflation in Turkey grew again in August, reaching 18 percentage points, which represents the highest point in the last 15 years. The official statistics released this week confirm the trend a linked to the dramatic collapse of the lira against the dollar in recent months.
According to the Turkish statistics office, consumer prices grew by 17.9% in August, compared to the same month last year; a figure higher than that of July 2018, when the increase was around 15.85%.
In response, the central bank is coming under pressure to approve an increase in interest rates.
The Turkish crisis characterized by the collapse of the lira and by the “economic war” created by tariffs and sanctions applied between Ankara and Washington – with reciprocal accusations and threats traded by Recep Tayyip Erdogan and Donald Trump. The crisis is further undermined by the President’s nationalist stance of confrontation and revenge.
Meanwhile, the first repercussions on the daily life of citizens are felt: the dramatic devaluation of the Turkish lira (-42% from the beginning of the year on the dollar) has pushed up the cost of bills. The peak in the cost of imported energy has forced the leaders of Ankara to increase gas and electricity prices. For industrial use, the increase is 14%, for domestic consumption 9%.
Analysts and experts warn that if the fall of the lira does not stop, the cost of debt will be unsustainable. And the crisis, will pass from currency to the banking sector with the real danger of insolvency for banks and companies.
Another element is the recession that, according to some observers, is already under way or at the gates. A figure yet to be confirmed: the manufacturing index in August fell to 46.4 points from 49 in July and signals a contraction of activity – between highs and lows – as early as April.
One of the emerging economies of Asia, and until recently, among the most promising, seems to have entered a spiral of endless recessive crisis. For many, the risk is that the collapse will continue in the future, exacerbated by ever higher rates.
