Economist Prof. Dr. Hakkı Hakan Yılmaz has warned that recent increases in petrol and diesel prices will put further pressure on inflation in Turkey, with higher energy costs also expected to feed through into the prices of other goods and services.
Yılmaz said petrol prices rose by 10.7 percent in August compared with July, while diesel prices increased by 14.4 percent. He calculated that the increases made a direct contribution of 0.33 percentage points to monthly inflation.
The impact has been considerably larger over the first eight months of the year. According to Yılmaz, diesel prices rose by 47.5 percent between January and August, while petrol prices increased by 33.2 percent. He said fuel price increases had made a direct contribution of 1.25 percentage points to inflation over the eight month period.
Turkey’s Statistical Institute, TÜİK, is due to publish the August inflation figures on Thursday at 10am. Economists currently expect monthly consumer inflation to have risen by between 1.25 and 2.10 percent in August, with the average forecast standing at 1.86 percent.
Based on that average forecast, annual inflation is expected to fall slightly from 31.75 percent in July to 31.52 percent in August.
Higher Energy Costs Could Trigger Further Price Increases
Yılmaz warned that the impact of higher fuel prices would not be limited to petrol and diesel themselves.
He said sharp increases in energy costs would inevitably feed into the prices of other goods and services, creating what economists describe as secondary price effects.
According to Yılmaz, these secondary effects could appear much more quickly than in the past, potentially accelerating the deterioration in pricing behaviour across the economy.
He said the period over which these secondary effects emerge could shrink from four or five months to as little as two months.
Yılmaz estimated that if the secondary effect in August were calculated at 1.33 percentage points, the total impact of fuel price increases would reach 1.66 percentage points on a monthly basis.
If the effect were spread over two months, he said the combined impact of petrol and diesel price increases on August inflation would be around one percentage point.
September Inflation Could Remain High
Yılmaz also warned that inflation could remain under pressure in September.
He expects Turkey to begin gradually moving away from the escalator mechanism used for fuel prices from September, while increases in education-related expenses could also add to inflation.
These factors, he said, could push September inflation above the levels currently planned or expected.
Yılmaz argued that reversing this trend would require a rapid and substantial fall in energy costs, together with a new Medium-Term Programme that restores confidence and provides hope across different sections of society.
Without such developments, he warned, inflation could remain above 32 percent by the end of the year even under a favourable scenario.
Source: ANKA / BirGün
