Minimum wage hike becomes inevitable in July
monthly THETURKISH STATISTICAL INSTITUTE’S ɑTURKSTATɒ inflation rose by 3.16% in March and was below estimations and near the year-end inflation forecast of the Central Bank for H1. Annual inflation reached 68.5%. The seasonally adjusted monthly inflation, which complies with the Central Bank’s year-end forecast, is 3%.
The seasonally adjusted monthly inflation realization was 3.22% in March, a positive development. The March inflation, measured by the Istanbul Chamber of Commerce’s Istanbul Wage Earners Cost of Living Index, is 3.9% monthly and 78.3% annually.
It’s obvious how we have afflicted ourselves with inflation for no reason in September 2021-May 2024. The Central Bank’s year-end inflation forecast is 36%, and we rejoice that the March reading roughly complies with it. However, it has been the second-highest March inflation since 2003, when TurkStat started to release consumer inflation data. Look where we are now after single-digit inflation for tens of years.
Reducing inflation must be the top priority of those who design and implement the economy program. They have an important advantage. External conditions work in our favor. The Federal Reserve will cut the interest rate thrice for the remainder of the year. The European Central Bank will join the rate-cut community after a while.
These are the conditions to raise capital inflows and FX supply to countries like Turkey. In other words, they don’t necessitate pressure on FX rate hikes, the primary determinant of inflation, through artificial ways such as FX sales. Of course, if we do things correctly.
The implemented program must reduce risk perception for Turkey and encourage residents to tend to the lira financial assets instead of FX financial assets. If this is achieved, inflation can be near 36% at the end of 2024. Deposit interest rates significantly above inflation is a must. Moreover, the gap in the program must be bridged.
While doing so, minimum wage and retirement salaries should increase in July. Retirement salaries are already rising; what I mean is that low retirement salaries must be raised well above the standard inflation adjustment. The hunger limit is TRY 16,793, and the minimum wage is TRY 17,002 currently. So, the minimum wage is TRY 9 higher than the hunger limit. It’s evident that the minimum wage will remain below the hunger limit when the April inflation is released. If the wage hike is postponed to January 2025, the situation will gradually worsen for minimum wage employees.