An Expert Economist’s Opinion: Why is it such a difficult challenge to drop inflation in Turkey?

Why is inflation persisting in Turkey? Şeref Oğuz, a respected expert and columnist for Ekonomim newspaper, shares his thoughts on this question.

“The main factor is the budget deficit… The public sector’s unchecked spending… The phenomenon of “camouflage inflation”…

Camouflage inflation poses a threat in two ways: 1- The government increases prices itself, 2- TÜİK (Turkish Statistical Institute) camouflages inflation, hiding price increases and wage hikes from the index. If the government doesn’t cut back, why would inflation weaken?

How can this resistance be broken?

First, we need to eliminate the ambiguity of the data. Today, every citizen carries their own “TÜİK” in their pocket and has personal figures based on their sector, region, goods, and services. Furthermore, although the government believes inflation will decrease, it does not consider the need to convince us of this.

Note: Inflation decreases not by cutting consumption, but by increasing production.

The government tried to cool the economy in the wrong way. Instead of slowing consumption, it weakened production. By not channeling funds into access to credit and making it harder for the industry to function, production stumbled, and we also weakened the goods and services meant for export. The exchange rate factor caused significant damage.

Inflation is the rate of price increase. Even if inflation is zero, the price of a 50-lira tomato will not fall to 49 liras; it will only go up to 51 liras the next day. The term we use for the level inflation carries prices to is called “cost of living.” This “cost of living” extends beyond the scope of the Central Bank’s capabilities. It is more resistant than the index.

When you increase production, the price of tomatoes will decrease. When you increase production, the range of goods and services for export will diversify, and prices will loosen. When you increase production, the price tags in markets will trend downward, the elements feeding inflation will be reversed, and the index can ease.

Instead, we tried to reduce inflation by cutting production. To make matters worse, we even considered the symbolic 15% increase in pensioners’ salaries as excessive. Why? Because we claimed that if we gave pensioners money, they would buy food and drive prices up. We even feared that if we made too large an increase in the minimum wage, aliens would destroy us.

Conclusion: Inflation decreases by increasing production, not by cutting income. There is no way forward by condemning fixed-income groups, pensioners, widows, orphans, families of martyrs, veterans, the elderly, and the disabled to hunger.”

Source: ekonomim.com (author Şeref Oğuz)

TAGS: #Turkey #economy #inflation #drop #challenge #cost #of #living