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Parents have switched to discount baby biscuits, the cost of
eggs has nearly doubled in a year, and a mock photo is
circulating on Twitter in which a man on bended knee offers a
woman a can of cooking oil instead of an engagement ring.
"We are buying only the absolute necessary and cheapest brands
out there. All food prices are rising but especially baby
formulas," said Huseyin Duran, 43, an Istanbul father of three
and security guard receiving partial state pay for lost work.
"I worry about my kids," he said. "We can only meet our rent,
groceries and loan payments."
In a world of near zero inflation and economic fallout from the
coronavirus, Turkey stands out with annual consumer prices
climbing to 15%, second only to Argentina among emerging markets
and by far the highest in the OECD.
Rising oil and fertilizer prices and dry weather are part of the
reason food inflation jumped more than 20% in a year. But
economists also point to government policy decisions which saw
the lira dive to record lows last year, hiking import costs on
some $9 billion in food.
Turkish President Tayyip Erdogan has reluctantly accepted sharp
interest rate hikes that will slow an economic rebound just as
COVID-19 vaccines are rolling out.
With surveys showing pantries are thinning out, Erdogan may need
to do more about basic living costs even after installing a new
central bank chief who in November pledged to tame inflation.
One policymaker told Reuters the government expects inflation to
be difficult in 2021 and must be monitored.
Turkey is "mired in a painful stagflation" even amid coronavirus
curfews and high borrowing costs, said Yesenn El-Radhi, senior
sovereign analyst at Capital Intelligence Ratings.
"Inflationary pressures continue to be high due to the recent
rise in global commodity prices and a lagged effect of the sharp
lira depreciation," he said.
LIGHTER SHOPPING BAGS
A trip to a the market - where eggplant, orange and sunflower
oil prices rose more than 50% last year - has become a serious
strain for Turks in addition to the pandemic, which has already
depressed workers and incomes.
"Every time I fill my pantry the shopping bags get lighter but
the bill gets higher," said Pinar, 31, who declined to give a
surname. "I buy in bulk so I don't have to shop again for three
or four months."
A furloughed chef, Pinar gets part of her salary under a
temporary ban on layoffs that she says only covers rent and
utilities. "I've had many sleepless nights (and) in the end I
think I'll be unemployed."
Hyperinflation dogged Turkey in the 1990s and only ended with an
International Monetary Fund programme that tamed prices just as
Erdogan came to power in 2003.
Inflation, led by food, jumped again in a 2018 currency crisis
and has since remained mostly in double-digits. Economists blame
a chronic trade imbalance and costly state FX interventions that
depleted reserves.
POLITICAL TEST
A Metropoll survey last month showed 80% believe inflation is
higher than the official tally. A separate survey by the Deep
Poverty Network showed more than half of respondents in Istanbul
relied on food handouts from the municipality.
Kemal Kilicdaroglu, leader of the main opposition Republican
People's Party, said the situation was getting worse. "There had
not been hunger in Turkey before. But hunger is the reality
now."
In a turnaround, Erdogan in November said even "bitter pills"
like high rates were needed to cool prices. Lutfi Elvan, his new
finance minister, said he would take structural steps to fight
inflation, which is expected to edge higher until April.
The government has several levers it can pull to ease pressure
on the public. Ankara has already cut taxes on tobacco, which
weighs heavily in the consumer price index (CPI), even while it
raised duties on alcohol and road tolls which have less impact
on the headline number.
State agencies also set the price of utilities such as natural
gas and electricity. Last month the government raised the
minimum wage by a net 16% for 2021, to 2,825 lira ($377) a
month, in a boost to workers but also to overall CPI.
"You cannot solve the food problem with interest rates," Gizem
Oztok Altinsac, chief economist at Turkey's top business
organisation TUSIAD, told a conference last week.
"Our problem with inflation is too big so we have to take more
targeted steps to solve it."
(Additional reporting by Nevzat Devranoglu, Orhan Coskun and
Murad Sezer; Editing by Toby Chopra)
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