The Turkish Statistical Institute (TÜİK - TurkStat) announced an increase in the consumer inflation rate for December 2020 compared with the previous month as 1.25%, resulting in the annual-to-date rate as 14.60%, which was slightly higher than the average rate predicted by market analysts. The annual inflation rate of 14.60% for December 2020 compares with 11.84% for December 2019.
TurkStad gave the 12 month average inflation rate for 2020 as 12.28%, which compares with 15.18% for 2019.
The highest monthly increase was recorded in household goods with 3.46%, followed by transportation with 2.64%, and food and non-alcoholic beverages with 2.53%. Monthly increases were also recorded in communications with 0.80%, health with 0.78%, housing with 0.67%, restaurants and hotels with 0.50%, and entertainment and culture with 0.07%. Monthly decreases were recorded in clothing and footwear with 3.18%, followed by miscellaneous goods and services with 0.58%, education with 0.03%, and alcoholic beverages and tobacco with 0.01%.
The highest annual increase was recorded in miscellaneous goods and services with 28.12%, followed by transportation with 21.12%, food and non-alcoholic beverages with 20.61%, household goods with 18.04%, health with 16.67%, and restaurants and hotels with 12.70%. Annual increases were also shown in entertainment and culture with 10.44%, housing with 9.59%, education with 6.84%, communications with 5.73%, and alcoholic beverages and tobacco with 0.65%. An annual decrease was shown in clothing and footwear with 0.32%.
There is much speculation as to the accurateness of the inflation figures produced by TurkStat as ordinary citizens understandably feel that they have experienced a much higher rise in the cost of living over the last year. In the New Economic Program announced on 29.09.2020, the yearend inflation forecast for 2020 was 10.5%, with a fall to 8% in 2021, to 6.0% in 2022, and 4.9% in 2023. The Turkish Central Bank revised its inflation rate forecast for 2020 to 12.1% and for 2021 to 9.4% on 28.10.2020. The Bank raised its policy interest rate 475 basis points to 15% on November 19th and 200 basis points to 17% on December 24th, such that it is now 2.40 percentage points above the inflation rate, contrary to previous period of negative interest rates. With its new economic team, the Turkish government has indicated that it is prepared to introduce monetary policy reforms. It has yet to be seen whether the government’s new approach will result in a more credible inflation rate being put forward.