The Turkish lira is crashing again on Thursday after the country reported the highest level of inflation in more than two decades. The nation’s cost of living is spiraling out of control and creating a crisis for millions of people. So, how bad is the inflation situation for the Eurasian market?
According to the Turkish Statistical Institute (TSI), the annual inflation rate surged to 69.97% in April, higher than the market forecast of 68%. This is also up from 61.14% in March.
On a month-over-month basis, the consumer price index (CPI) climbed to 7.25% last month, topping the median estimate of 6%.
Inflation was across the board, with upward pressure on food, transportation, energy, utilities, housing, and consumer goods and services.
Producer prices also skyrocketed in April on a year-over-year basis. The producer price index (PPI) advanced 121.82% last month, up from 114.97% in March. The monthly PPI dropped to 7.67% in April, down from 9.19% in the previous month.
In other economic data, the Istanbul Chamber of Industry Manufacturing purchasing managers’ index (PMI) contracted for the second consecutive month, coming in at 49.2 in April. Anything below 50 indicates contraction.
This was the lowest PMI reading since May 2020, driven by price pressures, slower production, lower new orders, and slumping export order growth. However, employment climbed for the 23rd consecutive month.
Foreign exchange reserves fell for the second straight week, totaling $65.4 billion in the week ending April 29. Turkey’s forex reserves have not topped $70 billion since the end of February.
Next week will be a flurry of data as automobile production, industrial output, retail sales, and labor data will be released.
Although Russia’s invasion of Ukraine has contributed to higher prices, the consensus among economists is that President Recep Tayyip Erdogan’s “very odd monetary policies” have the chief factor.
The USD/TRY currency pair soared 0.82% to 14.8595, from an opening of 14.7317, at 13:41 GMT on Thursday. The EUR/TRY rose 0.18% to 15.6852, from an opening of 15.6487.