London / Istanbul (CNN Business)Turkey's annualinflation ratereached nearly 80% in June. About 20 years.
Last month's consumer prices rose 78.6% compared to June 2021. This is due to soaring food and beverage and transportation costs. Food prices have almost doubled in a year and shipping costs have risen 123%, according to data from the Turkish Institute of Statistics.
Turkey's economy is exposed to the same global inflationary forces as other countries, but President Recep Tayyip Erdogan's unorthodox economic policies are fueling the crisis.
In September, Prime Minister Erdogan abandoned the rulebook and instructed Turkey's central bank to lower interest rates instead of raising them as prices rise.
Prime Minister Erdogan defended his monetary policy, arguing that lowering interest rates would lower inflation and boost production and exports. He blamed foreign intervention for his own economic problems.
Turkey's Minister of Economy, Nureddin Nebati, said in a tweet on Monday that "global commodity prices, especially energy and agricultural products, continue to rise," boosting inflation in June.
He said the government is taking steps to protect people from soaring prices, such as reducing sales taxes and providing subsidies.
But this move could turn the country into a more dangerous wage-price spiral, and things would get worse.
S&P Global Ratings said in a report last week that inflation and the weak value of the Turkish lira will continue to weigh on consumer spending. Annual inflation is expected to exceed 70% by the end of the year and to exceed 20% by at least mid-2023.
"The recession in Russia and Ukraine, and the slowdown in growth in the euro area and the UK, will weigh on exports, which until recently were key growth drivers for Turkey," the report said. According to the
report, the recovery of international tourism will bring some relief this summer by increasing foreign currency income. It can support Lira.
— Julia Horowitz, Gul Tuysuz, Jomana Karadsheh contributed to the report.