Inflation keeps rising in Türkiye depriving firms of access to loans

The Turkish Statistics Institute (TURKSTAT) has said that Türkiye's annual inflation accelerated to 47.8 per cent in July from 38.2 per cent in June.

High inflation remains a fundamental problem for the Turkish economy and it has become difficult for companies to obtain loans, the local newspaper Hűrriyet writes.

Earlier, Turkish Finance Minister Mehmet Simsek said that he expects inflation in the country to decline from mid-2024, adding that the country's economy is currently going through a transition period.

Although steps have been taken to control inflation rates are still high, the newspaper said.

“According to Simsek, inflation will remain high for a few more months because of the effect of the decisions taken. Some expect even a 60-65 per cent inflation rate by the end of 2023. This is indeed a difficult area, but a rapid decline in inflation is essential to continue lending to the economy", the newspaper writes.

"Moreover, the interest rates on them are still high. In order not to break the chain of growth and production, it is necessary to use credit channels more actively, possibly through selective lending. An outcome that would lead to higher unemployment should be avoided," the publication writes.

"If we add currency appreciation [against the Turkish lira] and oil prices to the tax hikes, fuel price hikes, which can occur several times a week, both hurt and cause serious reactions," the publication adds.

In June, Türkiye’s Central Bank said that it will continue to gradually tighten monetary policy until the inflation outlook improves significantly. The regulator raised its year-end inflation forecast to 58 per cent from a previous estimate of 22.3 per cent, Central Bank Chairperson Hafize Gaye Erkan said in late July. The central bank raised its key rate in June for the first time in more than two years, to 15 per cent from 8.5 per cent, and continued the increase in July, bringing it to 17.5 per cent.