Don’t be surprised if annual inflation reaches triple digits

THE TRNC Statistical Institute announced the consumer prices (inflation) for March 2022. Accordingly, monthly inflation was 13.05 per cent, three-month inflation totalled 27.73 per cent and the annual inflation rate from March of last year to March of this year was 83.19 per cent. We shouldn’t be surprised if annual inflation reaches three digits.

In March 2021 monthly inflation was just 1.39 per cent. With a difference of almost 70 percentage points, annual inflation during the same period was 13.97 per cent.

Of course, the most important reasons for this are the global rise in exchange rates, oil prices, food prices and import costs and therefore the increase in the prices of all goods and services in the country.

The increase in electricity prices and the government’s failure to take the necessary measures in a timely manner have exacerbated this and caused inflation to explode.

In Turkey, the inflation rate in March was 5.46 per cent and the annual inflation rate was 61.14 per cent. So our annual inflation rate is about 22 percentage points higher than in Turkey at the moment.

Since electricity, fuel and gas products are of high importance on our index, inflation also rose with the price hikes in our market.

Oil prices, which exceeded $130 [per barrel] due to the Ukraine-Russia war, are now around $100. Thus, fuel discounts should continue.

The average annual inflation rate of the products that make up the food and non-alcoholic beverages main group has reached 91.86 per cent. The annual increase in petrol came to 193 per cent and diesel to 240 per cent.

With the latest price rise, the price of bottled gas is now 230TL. Hikes have been made on bread, meat and chicken again.

The price hikes on people’s basic needs such as food, healthcare, fuel, gas and the hefty one on electricity have devastated citizens.

Increases on almost all goods and services have made life more expensive day by day and this has been reflected in record inflation figures.

I said that the exorbitant price hikes would cause the cost of living and inflation to skyrocket and shared my views on this matter in the print and visual media.

In particular, I emphasised that inflation in March would explode due to the excessive hikes on electricity, fuel and alcohol products and that I expected double-digit inflation. Indeed, the expected has occurred.

The increased rate shocked people and businesses, creating electricity bills that could not be paid.

The resulting outrage in the country caused the government to take a step back and make a discount [for March] of approximately 1TL per kilowatt-hour based on electricity segment prices.

In addition, the excessive hike on alcoholic beverages that upset citizens, markets, restaurants, bars and tourism businesses was also amended and reduced.

However, no-one would have had to go through any of this if they had done their homework before the electricity and alcohol hikes were made.

In fact, inflation figures would not have gone up this much. The government did not manage this period well.

In particular, citizens whose purchasing power is decreasing day by day are getting poorer due to constant price hikes on electricity, fuel, gas and goods and services in the market.

Another effect of the hikes on electricity, fuel and gas prices, which are among a producer’s biggest input costs, is that the market, which has been negatively affected by decreasing demand and consumption, will shrink.

As a result, the shrinking market will deal a blow to the Finance Ministry’s revenues and increasing unemployment will do the same to the social security institutions’ incomes, putting the general economy into crisis.

Therefore, they need to think long and hard before making a hike on energy products.

Provided that the government fixes the exchange rate on imports and supports domestic production, it is essential to reduce VAT, duty and withholding tax on imports of basic food, medicine and cleaning products in order to prevent a hike and expensiveness in the country to a certain extent and so inflation does not reach record levels.

Unfortunately, these measures have not been taken. Because the government has not taken the necessary measures, the price hikes on all goods and services caused the cost of living and inflation to rise, which in turn adds to the excessive growth of the [public sector] cost of living allowance and its burden on the budget.

The Treasury’s borrowing is already increasing. It has borrowed approximately 210 million TL so far just this year, especially for salary payments.

With the rise in the cost of living allowance, this debt burden is expected to increase even more after June.

Finally, let me say this: the breadline for food expenses of a family of four was 7,149 TL as of the end of March. Thus, the difference between the net minimum wage [6,090TL] and the breadline has reached 1,059TL. Those who receive social assistance and disability benefits are in an even more dire situation.