Inflation…? Still no good news…

I actually thought that it would be redundant to make any commentary on inflation as prices still remain stable. But now, given that the number of persons who are wondering about the future of inflation, I think the time has come for me once again to share my thoughts with you.

Considering the inflation data released yesterday, it can be seen that the upward trend in inflation remains intact even though there’s been slight improvement in core inflation. I’ve even warned the media saying that inflation might get out of control anytime now if we are not careful. Let me tell you why:

Apparently, food products and spending on healthcare have taken the first spot in major consumption groups last month, which are followed by food and non-alcoholic beverages, and finally education spending. These items are in fact daily needs that people buy regardless of seasonality.

There’s been an increase in 270 items added to Turkish inflation basket while a decline in 115 items is observed. Agricultural product prices, on the other hand, keep rising sharply. Therefore, it becomes more and more apparent that the government must implement a stronger and permanent strategy to regulate especially food and agricultural products instead of continuing the fight with the help of discount sales.

The interesting thing is that upward trend of prices continues despite there hasn’t been any improvement in consumer demand, which is the main reason that prevents core inflation from drifting down. If core inflation, which covers daily consumer goods and services that people have to purchase every month, doesn’t decline soon, we won’t be talking about any “downward trend” about neither general price level nor high cost of living.

National emergency measures won’t help Turkey control inflation”

In my opinion, emergency measures implemented so far to fight back against inflation will remain ineffective in the long term. As I always say, it’s possible for government to reduce inflation by lowering production costs and persuading the producers to sell goods and services to people at reasonable prices. Short-term measures will definitely not help bring inflation under control permanently.

Producing companies have been offering discounts on purchases of products in stock, including refrigerators, kettles etc., since the last quarter of 2018. But the inventory for these products is about to be completely depleted. Producers will have no more motivation for selling new products at low prices, which means prices may start to go up again even if there’s no demand.

As a matter of fact, one of the factors contributing to inflation in Turkey is the fact that private sector doesn’t exactly know what to want from the government. Private Sector constantly requests the political leaders to increase tariffs and import duties for fear of foreign competition. Consumers are forced to pay the price for domestic producers’ incapability to demonstrate the quality of their products and services.

Sadly, private sector failed to show the expected performance despite the fact that they’ve been given every chance to thrive, including a wide range of protectionist measures, incentives and high import tariffs. I never refrain to express this obvious fact at every meeting I attend.

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