Inflation in Turkey fell back below 40% in May for the first time in sixteen months, notably as a result of a temporary free gas measure.

The rise in consumer prices amounted to 39.6% over one year and is almost stable at +0.04% over one month, indicated the Turkish statistical institute (Tuik).

These official figures – the first since the re-election on May 28 of President Recep Tayyip Erdogan – are nevertheless disputed by independent economists of the Research Group on Inflation (ENAG). According to them, annual inflation is between 105% and 109%, taking into account or not the free gas.

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President Erdogan, who is entering a third term, has said he wants to make the fight against inflation his priority. It had exceeded 85% in the fall, before slowing month after month since November.

However, this decline can be explained by a "base effect", as prices continued to rise month after month, but less sharply than a year earlier.

Towards a return to an orthodox economic policy

This slowdown is also linked to a campaign measure by Recep Tayyip Erdogan: the Turkish president announced free gas for households in May, which will continue to benefit from 25 cubic meters of free gas per month until May 2024.

The head of state on Saturday appointed a new economy minister, Mehmet Simsek, who will be tasked with curbing inflation and restoring investor confidence.

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Already Finance Minister (2009-2015) then Deputy Prime Minister for the Economy (until 2018), Mehmet Simsek, former economist at the American bank Merrill Lynch, will seek to restore an orthodox economic policy. When he took office on Sunday, he already warned that it would be necessary to return to "rational measures" to recover the economy.

During the campaign, President-candidate Erdogan defended his heterodox monetary policy. Contrary to conventional economic theories, the head of state has forced the Turkish central bank to regularly lower interest rates, contributing to soaring inflation.

With AFP

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