Quakes put more pressure on Turkey’s effort to curb inflation

Ankara, March 7,2023:  After reaching a staggering 85.51 points in October 2022, Turkey’s consumer prices index (CPI) has seen a steady decrease for the past months.

In February, the country further narrowed its inflation number, reaching 55.15 points, compared to 57.68 points in January, according to a report published by the Turkish Statistical Institute (TurkStat).

While Turkey’s inflation is declining, it is projected to remain high throughout the year 2023 due to interruptions brought on by catastrophic earthquakes, which economists believe will have an impact on the cost of housing, daily commodities, and services.

Last week, the Turkish central bank lowered the benchmark interest to 8.5 per cent from 9 per cent to cushion the economic impact of the February 6 earthquakes that killed more than 45,000 people.

However, economists warned that such a move will likely cause the country’s CPI to bounce back, which will hurt more Turkish families.

“We observe that monthly price increases are still above the average of recent years,” Enver Erkan, chief economist at Istanbul’s Dinamik Investment Securities, said in a note to investors.

Erkan predicts that the trend in inflation will be flat starting in the middle of the year and will not go below 50 percent, which is still dangerously high.

Meanwhile, the rapid increase in staple food prices will continue to cause trouble for cash-strapped households in the next several months.

The TurkState’s latest report revealed that food prices in the country grew by 69.33 in February, led by vegetables, red meat, milk and dairy products.

According to a report from the World Bank, the earthquakes have cost Turkey as much as $34.2 billion in damage, but reconstruction costs could be twice as high.

President Recep Tayyip Erdogan, who is seeking five new years in office, has promised to rebuild the quake-hit regions within one year, a huge project that will cost billions of dollars.