The lira held firm on Friday after Turkey’s finance minister was cited as saying inflation would peak in January and hit single digits by June 2023 elections, but a key survey showed inflation would still be around 30% at the end of this year.
The lira gained 0.3% to 13.58 to the dollar by 0925 GMT. It weakened 44% last year, with a currency crisis halted last month after currency interventions and a government scheme to protect lira deposits from forex depreciation.
Minister Nureddin Nebati was quoted as telling Bloomberg in an interview that the lira facility had attracted 126 billion lira ($9.3 billion), of which 15% came from foreign currency accounts, with some 300,000 people participating in the scheme.
He said that work on increasing the capital of state banks will be completed before the end of the month.
Driven by the lira plunge, inflation surged to a 19-year high of 36% in December, the highest under President Tayyip Erdogan’s rule, and is seen reaching up to 50% in coming months.
But Nebati said it would ease as the summer approaches.
“Currently we are carrying the hump of December. In the summer, both with easing food prices and in terms of global inflation, we will be entering a period where the impact of both of these will lessen,” he said, forecasting single-digit inflation by the time of elections scheduled for June 2023.
A central bank survey on Friday showed consumer price inflation was seen at 29.75% at end-2022.
The lira crisis in November and December was sparked by the central bank’s 500 basis points of rate cuts to 14% since September. It eased policy under pressure from Erdogan, who seeks higher growth by boosting production and exports.
BBC ISTANBUL STAFF STRIKE
The jump in living costs has eaten into household earnings, prompting government measures including a 50% rise to 4,250 lira ($275.44) in the monthly minimum wage for 2022 to offset strains.
Last month Turks began queuing to buy cheap bread from the Istanbul municipality, while the costs of electricity, natural gas and fuel have all jumped.
With unions pushing for wage hikes, 12 staff at the BBC Istanbul bureau went on strike on Friday after collective bargaining talks with the broadcaster reached no deal.
The Turkey Journalists’ Union said the BBC’s final offer of a 20% pay increase did “not sufficiently address the meltdown in the staff’s wages,” which are paid in lira.
A BBC spokesperson said it understood staff concerns and had implemented a pay increase and made an additional benefits offer, with “mechanisms in place to support staff financially during sustained volatility”.
The erosion of Turks’ earnings has been felt in particular among working and lower middle class Turks, who form the electoral base of Erdogan’s ruling AK Party (AKP).
Recent opinion polls show more Turks now believe an opposition alliance is better suited than Erdogan and the AKP to end the economic turmoil.