Turkey enters new year with pay hikes but falling living standards

Ankara: Turkey has ushered in the new year with significant pay hikes for minimum-wage earners, pensioners, and civil servants amid a cost-of-living crisis that has plunged millions into financial hardship.

Inflation remains alarmingly high despite a sharp drop to 64.2 per cent in December 2022, down from 84.3 per cent reported in November after hitting a 24-year high in October, Xinhua news agency reported citing data from the Turkish Statistical Institute.

Annual food prices rose by 77.9 per cent in December, down from 102.6 per cent in November, while energy prices increased 118 per cent, down from 94.4 per cent compared to the previous month.

The government announced a 55-per cent increase in the official minimum wage for 2023 to a monthly 8,500 Turkish liras ($453), raised salaries for civil servants, and hiked pensions by 30 per cent to ease households’ pressure stemming from runaway inflation.

President Recep Tayyip Erdogan also announced a measure that would allow over 2 million people to potentially retire immediately, but the spending spree as a result of the measure is expected to swell the budget, according to experts.

The government has as well launched a long-awaited income housing loan campaign for mid-income citizens and relief measures for businesses.

Erdogan, who faces tight presidential and parliamentary elections in June, had promised a serious drop in the inflation rate in the new year.

“We expect similar base-driven effects to continue for a few more months, bringing inflation down to 40 percent in the period leading up to the election,” Enver Erkan, chief economist at Istanbul’s Tera Securities, said in a note to investors.

“Despite this, we still need to talk about a public expenditure increase that can feed periodic price increases before the election,” the expert warned.

Most opinion polls show the president and his ruling Justice and Development Party, who are in power for more than two decades, have lost some support in recent years, as the currency depreciated and living costs rose.

While wages have been increased for millions, price hikes continued on a wide range of services and goods in January.

Following a price increase of 29 per cent in mass transport fees in Istanbul, the capital city Ankara has followed suit with around 35 per cent rise for commuters, the municipalities announced.

Alcohol and cigarette prices saw an increase of 22.2 per cent while the prices of most essential food products such as bread, eggs, meat, and dairy have hiked between 30 and 50 per cent, according to the local press.

In Ankara’s residential Cankaya district, citizens have expressed frustration with the government’s wage hikes.

“The wage hikes are insufficient and have already been eroded” by soaring food prices, Adem Cam, a 70-year-old pensioner, told Xinhua.

The man who still works in the real estate sector said it is impossible to get by with a minimum wage in a family of four, calling on the government to work on measures that would refrain retailers from hiking their prices.

“They may have hiked wages by 30 to 40 per cent, but food prices are going up unabated … Therefore the salary increases don’t mean anything because the price of essential goods has gone up,” he said.

“In the past, we could go somewhere to eat or drink with my spouse and my children, but now this has become impossible,” Cam lamented his falling purchasing power.

According to a report released in December of 2022 by the Confederation of Turkish Trade Unions, the poverty threshold increased to 26,481 liras, which is over three times the recently hiked minimum wage.

Most Turkish households are not feeling the marked decline in the inflation rate and are still struggling to make ends meet.

“I don’t feel a drop in inflation. For me, the inflation rate is around 300 per cent,” said Nihat Basaran, a 52-year-old retired army personnel.

“There is a big difference in price in the items that you buy yesterday compared to today. Yesterday was better than today, and today will be better than tomorrow,” he added.