Turkey’s middle class falls into poverty due to inflation and currency

An alleged advertisement in a supermarket in Turkey reads: “Warehouse waiter wanted to change price tags”, A sign that inflation can create new jobs, they ironically on social networks.

Reality is not far off, several store employees confirm: the devaluation of the Turkish lira, of 30% so far this year, forces prices to change “practically daily”.

“Every time we receive merchandise, the products have become more expensive“, The owner of a grocery store tells Efe, while a butcher estimates that he must change prices”every fifteen days”.

The value of the Turkish lira is decisive for the prices of vegetables or meats: “The compost comes from abroad” and “Feed is imported”, indicate the merchants.

Rate reductions

The current streak of depreciation of the currency to historical lows began last September, when the Central Bank lowered interest rates from 19% to 18%, a step that it repeated in September and last Thursday, with which they are now in 15%, well below year-on-year inflation of 19.9%.

After yesterday’s decision, the lira fell almost 6%: the euro was changed by 12.78 liras and by 11.27 the dollar.

The type reductions correspond to the ideology of the Turkish president, Recep Tayyip Erdogan, who has been ensuring for years that high interest rates cause high inflation, contrary to what the orthodox theory says.

“Overly accommodative monetary policy has fueled high inflation, including skyrocketing food prices, which appear to be a central cause of social unrest and poor government results in polls.”Says Dennis Shen, director of sovereign ratings at Scope Ratings, in an analysis of the situation in Turkey.

Increase in poverty

Erdogan’s strategy, according to which cheap money should incentivize investment and create jobs, is criticized by the social-democratic CHP party, the largest in the opposition.

“They think that by losing the lira in value, production will become cheaper and exports will increase, as was the case in China, but Turkish manufacturing depends a lot on imports, which are paid for in dollars, so people get poorer and local demand is reduced”, Said the economist Selin Sayek Böke, secretary general of the CHP.

According to official data, 42% of Turkish employees earn the minimum wage of 3,040 net lira which, equivalent to about 240 euros at today’s exchange rate, has suffered a loss of purchasing power of 25% compared to the level of two years ago, which Although it was lower in lira, 2,020, it was equivalent to 320 euros.

The largest Turkish union, Türk-Is, ranks as “poverty limit“A monthly income of 10,000 lire, and 3,000 lire the”hunger threshold”, Which points to the risk of Turkey’s middle class disappearing.

A professor at a public university now charges about 13,000 lire a month, equivalent to just over a thousand euros, while a head doctor stays at 10,000 (about 800 euros).

Early elections?

Against this background, the CHP and its ally, the IYI party, this week joined their voices to demand early elections, an option so far firmly rejected by Erdogan, which however does not stop in the polls.

The percentage of those who disagree with the management of the economy has risen from 62% to 74% in the last three weeks. Two out of three citizens do not believe that the AKP, the Islamist party that has governed since 2002, can rectify the situation.

Consistently, voting intention for the AKP has dropped to 28% for the first time, tied with its direct rival, the CHP, which could prevail thanks to its alliance with the IYI.

But for now, the president’s environment is confident that the economy will recover until the elections scheduled for June 2023, writes Turkish journalist Hande Firat.

Pessimism is prohibited: this week 38 people denounced defeatism in 2018 had an appointment in court for having predicted on social networks a drop in the lira from 7 to 10 units per dollar.

But it was the judge who did not go to court, perhaps to avoid having to agree with them, at a time when the dollar is already trading at 11 liras, the lawyer in the case, Sanem Bahçekapili, ironizes on Twitter.