Turkey faces disparate inflation figures

By Muhdan Saglam and Kadir Devir

The TurkStat (Turkish Statistical Institute) has released the long-anticipated inflation figures for October, triggering a wave of analysis and concern among economic experts and policymakers. The official data indicates that the CPI (Consumer Price Index) rose by 3.43 percent monthly, positioning annual inflation at 61.36 percent. However, figures from the ENAG (Inflation Research Group) tell a different story, showing a monthly increase of 5.09 percent and an annual rate soaring to 126.18 percent.

This discrepancy has not gone unnoticed. The Central Bank of the Republic of Turkey, in its Inflation Report IV meeting on November 2, adjusted its year-end inflation forecast upward by seven percentage points, from an initial 58 percent to a projected 65 percent. Professors Murat Birdal and Senol Babuscu have voiced their analyses to Nesrin Nas and Artı Gerçek, aligning with the consensus among economists that inflationary trends are likely to persist through the year's end, potentially surpassing the Central Bank's revised target.

Concerns over data and manipulation

The stark contrast between TurkStat and ENAG's data has been particularly alarming for Prof. Dr. Murat Birdal, who noted that the nearly two-fold difference in annual inflation rates is a troubling sign. "The divergence has narrowed in recent months, but the inconsistency raises concerns over the credibility of the official data," said Birdal. He further commented on the implications this has for the Central Bank's monetary policy, emphasizing the importance of transparent and trustworthy data for maintaining confidence in economic strategies.

Birdal also highlighted issues around managing utility prices, such as electricity and natural gas, which have remained unchanged for an extended period. He warns that impending hikes in these sectors could significantly influence inflation in the final quarter. "If the public suspects year-end price manipulation, the Central Bank's credibility will be undermined," Birdal explained.

Conversely, Economist Senol Babuscu found October's inflation figures to be within anticipated ranges. However, he cautioned that the year-end rate might exceed the Central Bank's latest projection, potentially reaching between 65 and 70 percent. Babuscu disputed the Central Bank's suggestion that inflation peaked in May, proposing that June might reflect a peak closer to 80 percent.

Inflation's impacts many sectors

Economist Nesrin Nas assessed the inflation breakdown, noting the disparate effects across various sectors. Despite price reductions in fuel reflecting transportation costs, the onset of winter and the school season has seen price hikes in clothing and footwear. She also noted the persistent inflation in the hospitality sector, highlighting that the services sector has seen no price reductions. "Inflation measures the rate of price increases. To see a reversal, we'd need to see a negative inflation rate," Nas stated.

Finally, Nas underscored the necessity of considering low-income groups in inflation analysis. With the Central Bank's focus on core inflation, she argues for a separate inflation basket to measure the impact on those with lower incomes to ensure that claims of protecting people with low incomes from inflation are substantiated.