Turkey- inflation jumped to a 24-year high of 73.5% in May

War in Ukraine, rising energy prices and a tumbling lira are the main reasons of high inflation in Turkey

Turkey’s annual inflation rate jumped to a 24-year high of 73.5% in May. The higher inflation fueled by the war in Ukraine, rising energy prices and a tumbling lira.  The cost of living crisis has deepened as the prices of energy and food continues to soar. The Turkish people are finding it hard to cope with this killing inflation.

Transport and food costs have soared by 108% and 92% respectively over the last year, reflecting a deepening economic crisis for Turks struggling to afford basic goods.
 Inflation has surged since last autumn, when the lira slumped after the central bank launched a 500 basis-point easing cycle sought by President Recep Tayyip Erdogan.

The latest figure surpassed the 73.2% touched in 2002 and is the highest since October 1998, when annual inflation was 76.6% and Turkey was battling to end a decade of chronically high inflation.

The domestic producer price index climbed 8.76% month-on-month in May for an annual rise of 132.16%, reflecting how a 20% drop this year in the currency has sent import costs soaring. The lira weakened 0.25% to 16.5050 against the dollar touching its weakest since December. The local currency tumbled 44% in 2021 and another 20% this year.

In April, the central bank forecast annual inflation would peak by June before declining to near 43 percent by year-end and single digits by end-2024.

The government has previously said inflation will fall to single digits next year under its new economic program - prioritizing low interest rates to boost production and exports - aimed at achieving a current account surplus. However, data on Thursday showed the trade deficit widened 157%  year-on-year in May to $10.7 billion.
Economists see inflation remaining high for the rest of 2022 due to the war, weakening lira and the central bank’s reluctance to raise rates. The median estimate for inflation at year-end stands at 63% , up from 52% in last month’s poll.

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