ISTANBUL (AFP) – Turkish President Recep Tayyip Erdogan yesterday announced the third major minimum wage hike in a year to try and combat a historic jump in consumer prices ahead of crunch elections.
More than 40 per cent of Turkiye’s workforce earns the lowest income allowed by law.
Erdogan relied on support from the working classes to rise to power nearly two decades ago – and will need it again to secure re-election in polls which are due by next June.
But Turkiye’s poor have been hit the hardest by an economic crisis that has seen the official annual inflation rate reach 85 per cent.
Yesterday the Turkish leader said the country would boost the monthly take-home pay to a minimum of TRY8,500 (USD455).
The minimum wage stood at TRY2,826 in December 2021, which at the time was slightly less than USD300.
It was raised to TRY4,253 last January and then to 5,500 in July.
Turkiye’s latest economic crisis started when Erdogan – a lifelong opponent of high interest rates – pressured the central bank to bring down chronically high consumer prices by lowering borrowing costs.
Conventional economic theory urges policymakers to fight inflation by curbing demand and raising the price of doing business through higher interest rates.
Erdogan’s approach set off a currency crisis that saw the lira lose nearly half its value in a matter of weeks late last year.
The government has responded by spending its reserves on currency support measures and imposing complex economic rules aimed at bringing inflation under control.
Erdogan promised yesterday that inflation will slow to 20 per cent by the end of next year.
“We will witness a rapid decline of inflation rates starting this month,” he said in televised remarks. The central bank was expected later yesterday to keep its benchmark interest rate at nine per cent.
Turkiye’s official inflation rate of 84.39 per cent means that banks lose 75.39 per cent of a loan’s value if they lend money for a year at the official interest rate.
