Turkey Announces Three-Year Plan To Curb Inflation

Turkey has announced a three-year austerity and public spending cut plan in a bid to curb inflation, AFP reports.

In April, inflation in Turkey reached 70% year-on-year.

"Our priority is to fight the high cost of living. Low single-digit inflation is essential for sustainable growth," Economy Minister Mehmet Shimshek said at the plan's presentation in Ankara.

The plan envisages numerous budget cuts "across the entire state administration", some of which will require legislative changes to be submitted to parliament, the minister added.

The purchase or lease of new vehicles for the civil service will be banned for three years, except for "mandatory requirements" in the health, security, and defense sectors.

The minister promised that the use of imported vehicles within the civil service would also be discontinued, as well as the use of public transport imposed on civil servants.

The construction and purchase of public buildings has also been suspended for a period of 3 years, except for earthquake protection or after natural disasters.

Other budget cuts are also planned to "discipline spending", such as a 10% reduction in public budgets for the purchase of goods and services and a 15% reduction in investment, excluding spending for the regions affected by the February 2023 earthquake.

The minister did not specify the government's salary policy but said the number of new civil service recruits would be limited to the number of people who retire.

In mid-April, Turkish Labor Minister Vedat Isihan announced a freeze on the minimum wage, which usually rises in July, unlike the previous two years.

The net minimum wage was increased by almost 50% on 1 January to 17,002 Turkish liras (€489).

According to official data released in early May, inflation in Turkey reached 69.8% year-on-year in April, up from 68.5% in March.

Last week, Turkey's Central Bank Governor Fatih Karahan estimated that inflation would start declining in June and revised up slightly his year-end forecast from 36% to 38%.

Shimshek confirmed a return to single-digit inflation by the end of 2025.

The staggering rise in consumer prices and the collapse of the Turkish lira against the dollar and euro led to the heavy electoral defeat inflicted on President Recep Tayyip Erdogan and his Justice and Development Party (AKP) in local elections held on March 31.

A group of independent Turkish economists (Enag) estimated inflation at over 124% year-on-year in April, up 5 points in one month. / BGNES