Türkiye’s inflation eases but consumer confidence slumps

by Burak Akinci
ANKARA, Aug. 5 (Xinhua) — Türkiye’s annual inflation rate tumbled in July, official data showed on Monday, offering a glimmer of hope for an economy battered by soaring prices.
However, consumer confidence continued its downward spiral, reflecting lingering concerns about the outlook.
Consumer prices rose 61.8 percent year-on-year in July, down from 71.6 percent in June, the Turkish Statistical Institute (TurkStat) said. While a welcome decline, monthly inflation accelerated to 3.2 percent from 1.6 percent in June, driven partly by pension increases.
The figures come as Türkiye grapples with an economic overhaul spearheaded by Finance Minister Mehmet Simsek, who has tightened monetary policy and sought to restore investor confidence. The lira has stabilized and foreign inflows have risen, but the effects of years of high inflation are still being felt.
“We continue to receive positive results from our program, whose main goal is disinflation,” Simsek said on social media. “The decline in inflation will be felt more in the coming period.”
Despite the easing headline figure, Turks are struggling with the cost of living. A separate TurkStat report last week showed consumer confidence fell for a fourth straight month in July.
“The government’s program aims to cut spending and maintain high interest rates to keep inflation in check. However, consumers are still reeling under a heavy burden,” said Mustafa Sonmez, an independent economist.
A recent hike in natural gas prices will further strain household budgets, he warned.
Food inflation remains stubbornly high at 59 percent, while the central bank’s year-end inflation target of 38 percent is seen as overly optimistic by many economists.
To cope, Turks are increasingly relying on credit, with bad bank loans surging 26 percent this year and credit card debt defaults rising sharply.
“Inflation has risen in Türkiye since 2018, and this has spread the expectation among individuals and companies that high inflation will continue,” said Senol Babuscu, a finance professor.
In a bid to boost fiscal discipline and fairness, the government has approved a sweeping tax reform. “Our goal is to collect more tax from those who earn more and less taxes from those who earn less,” Simsek said.
While the inflation slowdown is a positive development, the road to recovery is expected to be long and challenging. ■