The Turkish Statistical Institute (TÜİK - TurkStat) announced an increase in the consumer inflation rate for May 2021 compared with the previous month as 0.89%, resulting in a fall in the annual-to-date rate to 16.59%. The May 2021 inflation rate is significantly below the projection of 17.17% by market analysts in a poll organised by Anadolu Ajans, the state’s national news agency. The annual inflation rate of 16.59% for May 2021 compares with 11.39% for May 2020 and 17.14% of the previous month of April 2021.
The highest monthly increase was recorded in transportation with 2.56%, followed by clothing and footwear with 1.76%, and miscellaneous goods and services with 1.62%. Monthly increases were also recorded in restaurants and hotels with 0.95%, housing with 0.76%, household goods with 0.75%, education with 0.60%, communications with 0.56%, health with 0.30%, and food and non-alcoholic beverages with 0.29%. Monthly decreases were recorded in entertainment and culture with 1.32%, and alcoholic beverages and tobacco with 0.01%.
The highest annual increase was recorded in transportation with 28.39%, followed by household goods with 21.79%, health with 19.30%, miscellaneous goods and services with 17.92%, restaurants and hotels with 17.73%, and food and non-alcoholic beverages with 17.04%. Annual increases were also shown in housing with 14.08%, education with 10.57%, entertainment and culture with 10.05%, communications with 8.07%, clothing and footwear with 5.75%, and alcoholic beverages and tobacco with 2.90%.
There is much speculation as to the accurateness of the inflation figures produced by TurkStat as ordinary citizens understandably feel that they have experienced a much higher rise in the cost of living over the last year. Under the new leadership of Şahap Kavcıoğlu, the Turkish Central Bank has revised its inflation rate forecast for 2021 from 9.4% to 12.2% in its 2021-II Inflation Report of April 29th, 2021. The Bank has also forecast a 7.5% inflation rate for 2022, and a 5% inflation rate for 2023. The May 2021 inflation rate of 16.59% is now 2.41 percentage points below the Bank’s policy interest rate of 19%. In light of the continuing volatility of the Turkish lira and the aversion of the government towards increasing interest rates any further, it is unlikely that inflation will be brought down under control in the near future.
On 03.06.2021, TurkStat announced that it had made an oversight in the calculation of the inflation rate in that ”last seen prices” were being used instead of “average prices”. This correction will apparently have a deflationary effect on inflation figures but we will see if this is the case in future months.