Feeling the heat? Turkey’s economy certainly is, thanks to its hot inflation data. As of May 2024, the inflation rate has soared to 75.45% — the fastest pace since Nov. 2022. This record inflation, now in its third year, stems from political interference in financial policies. President Recep Erdogan’s previous decision to lower interest rates devalued the country’s currency, reversing decades of robust economic growth.

• Education experienced the highest annual price rise at 104.8%, followed by housing at 93.2%, and hotels, cafes, and restaurants increasing by 92.9%.
• Even with significant interest rate hikes, Turkish consumers kept spending high — resulting in a 7.3% jump in household consumption and a 5.7% economic growth in Q1.

The road ahead: After President Erdogan’s re-election, he dropped his opposition to interest rate hikes to combat soaring inflation. Turkey’s central bank plans to keep interest rates high into Q3 2024, aiming to reduce inflation to about 38% by year-end — a goal some experts find ambitious. Despite the challenging economic conditions, policymakers anticipate potential rate cuts in Q4 based on inflation trends. Finance Minister Mehmet Şimşek remains optimistic, stating that the disinflation process will begin in June. He declared, “The worst is over!”