TURKEY Inflation and economic crisis are sinking the Turkish middle class

Growing climate of “austerity” in the country. Forecasts for 2022 promise a further rise in inflation, after the 36% recorded last year, a record figure since Erdogan came to power. In a nod to Islamic radicals, the government raises taxes on alcohol and tobacco, but causes another collapse in spending.

Istanbul (AsiaNews) – The gradual increase inflation, accompanied by steadily rising prices (including those of food and basic necessities), is bringing Turkey’s impoverished middle class to its knees. More and more people are being forced to reduce their spending in areas as diverse as shopping, transport, gastronomy, travel, leisure and entertainment, in a climate of “austerity”. The phenomenon, explains a detailed investigation of al-Monitor, does not only affect the most vulnerable sectors of society. It impacts a large number of citizens, resulting in a contraction in consumer demand in recent days.

For 2022, inflation forecasts show a sharp increase from 36% last year, the highest figure recorded during the 19-year reign of Recep Tayyip Erdogan – as prime minister or president – and his AKP party. Consumers started the new year overwhelmed by an avalanche of price hikes for goods and services like electricity, natural gas and transportation. Increases are estimated at 15% in January – compared to 13.5% in December – and the increase is expected to remain in double digits in February and March.

The first to feel the blow of the crisis are the unemployed: an army made up of 3.8 million people looking for work, and more than 4 million people who have given up their jobs. Recently, the government increased the minimum wage by 50%, bringing it to 4,250 Turkish liras (about 273 euros), in an attempt to protect it from inflation. However, this adjustment should lose its relevance in March, resulting in a continued erosion of real income. Even high earners and small independent entrepreneurs in rural and urban areas – the hard core of the middle class – are not immune, as the standard of living changes sharply and consumption patterns are constantly revised.

Soaring prices are accompanied by spending cuts: the price of a car is up 50% from last year and further increases are expected, which will only sink buying plans of new cars. Indeed, today it is a luxury to travel by car: fuel prices are exploding, and with the rise in tolls, Istanbul, formerly always congested, has seen traffic gradually decrease since the beginning of the year. “People can no longer use their cars,” wrote Murat Ongun, spokesman for the municipality. The consumption habits of the middle class are also changing, as confirmed by the fall in restaurant sales, fewer and fewer of them being able to afford the “luxury” of eating in restaurants or meeting up for a drink.

On January 3, the government increased the excise tax on alcohol and tobacco consumption by 47%, leading to a price increase of up to 33%. Taxes represent 80% of the price of a pack of cigarettes, 75% of a bottle of raki (anise-based alcoholic drink) and almost 67% of half a liter of beer. Alcohol taxes sparked new discontent among the population. It is seen as a deterrent used by the government to discourage the consumption of alcoholic beverages, a nod to the radical religious and Islamic faction within it. As a result, more and more tobacconists and restaurants are struggling to stay afloat.

In a scenario that could head towards hyperinflation, loan applications have also fallen sharply among the middle class. In particular, home and car loans – the most popular – which have recorded a sharp drop in real terms. In the retail trade, many companies have experienced a drop in turnover since the beginning of the year. In the same situation are clothing stores, as even the sales season failed to stimulate spending. Consequently, the sharp contraction in demand is expected to lead to deep economic stagnation in the second quarter of 2022, with further negative repercussions on the labor market.

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