Inflation in Turkey 2024: Will it Decrease or Continue to Rise

What are the causes of inflation in Turkey?

Inflation in prices is usually a source of fear for people, because it leads to disruption in the prices of goods, which becomes a burden on a segment of society. However, what many do not know is that inflation itself can be beneficial and healthy, as it affects and is affected by the circulation of money. Economists are well aware that inflation can be viewed holistically as a double-edged sword.

There are multiple causes of inflation, some related to demand and others to supply. When demand for goods exceeds the economy's production capacity, prices rise and inflation occurs. Similarly, when supply decreases while demand remains steady or increases, prices are also affected. This is one of the main reasons for inflation, similar to what the world experienced and what economic experts predicted after the global lockdowns accompanying the Covid-19 pandemic. Increased demand and halted production for a period led to an unprecedented imbalance in the global economy and trade, the effects of which are still felt today.

Other reasons include flawed economic policies, disasters and wars, or even fears of inflation itself, which drive people to buy and stockpile goods, disrupting price stability.

What is the inflation rate in Turkey in 2023?

At the time of writing and discussing the annual inflation in Turkey, at the beginning of March 2024, we refer to the method of calculating inflation in Turkey according to the data of the Turkish Statistical Institute, which also measures inflation on a monthly basis. Inflation in Turkey rose during February 2024 to 67.07% year-on-year, as announced by the institute in its latest reports.

According to the same source, inflation rose by 4.53% in February compared to the previous month of January.

The inflation rate also reached 67.07% compared to February 2023.

What are the inflation forecasts for Turkey in 2024?

The Turkish Statistical Institute and the United Nations, in a report issued by the UN Department of Economic and Social Affairs, predicted that Turkey's inflation index will slow down in 2024, due to GDP growth rates of 2.7% and 3.1% in the coming year.

The UN report also predicted that inflation in Turkey will decline in 2024, with the rate remaining in the double digits until 2025. Government statements also indicate an optimistic outlook for the future of the Turkish economy until that date.

The Turkish government, through Vice President Cevdet Yilmaz in his latest statements, confirmed its commitment to prioritizing the reduction of inflation and the permanent stability of prices, in a meeting with international investors in London.

Despite inflation peaking at around 65% annually, the Vice President expressed confidence that anti-inflation policies will lead to a sharp downward trend in indicators in the second half of 2024.

Which sectors are most affected by inflation in Turkey?

Inflation in Turkey affects several key sectors of life due to the link between services and operating costs, but the impact varies depending on different factors.

The food sector is among the most affected, as food prices and related sectors have seen rapid increases in recent years due to higher supply costs, disruptions in the global shipping system, rising energy prices, and the depreciation of the Turkish lira since 2014.

The housing sector in Turkey has also suffered from the consequences of the inflation crisis, with real estate prices growing rapidly, especially around 2022, affected by higher construction costs and materials, increased housing demand, and the desire of many to move to safer, earthquake-resistant modern properties.

Inflation and its consequences have also affected transportation, education, healthcare, and pharmaceuticals, and it has touched almost every area of expenditure, but to varying degrees.

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What are the Turkish government's plans to address inflation?

The Turkish government is working to reduce and address the inflation problem by all means, through enacting new laws and incentives to encourage foreign investment, as reflected in several official statements on the matter.

Ahmet Burak Daglioglu, head of the Investment Office of the Turkish Presidency, emphasized Turkey's ongoing economic stability during his participation in the "Brand Finance" Global Soft Power Summit 2024 in London, making Turkey a beacon for international investment.

Through the International Direct Investment Strategy 2024-2028, the Turkish government hopes to see results soon, especially with the efforts of the Investment Office of the Presidency, which is committed to promoting and facilitating the vast opportunities Turkey offers to international investors. Turkey has succeeded in attracting more than 700 global companies working in technology and R&D, in addition to more than 80,000 global companies in various business sectors, as well as tax reduction policies and other measures expected to contribute to reducing inflation in the near and medium term.

How has inflation in Turkey affected the real estate sector?

It was natural for the real estate sector in Turkey to be affected by the inflation crisis that hit the country, as property prices saw rapid jumps, influenced by several key factors, including:

1. The rise in building material prices caused by the global inflation crisis, especially imported materials.
2. The depreciation of the Turkish lira, which further reduced the ability to acquire property as before the crisis.
3. The increase in housing demand, with people moving to safer, earthquake-resistant properties, especially after the Maras earthquake on February 6, 2023.
4. The rise in borrowing costs due to higher interest rates, which naturally affected the slowdown in purchasing activity and drove many to seek other investment avenues.

Overall, these factors have had a clear impact on the real estate sector, in addition to other factors whose details are beyond the scope of this discussion.

Why is real estate seen as an effective hedge against inflation?

Real estate can be an ideal financial hedge against inflation, as property prices generally tend to rise, even if there are periods of stagnation. Prices usually recover after a period of stability, which means preserving capital during inflation.

Additionally, real estate can generate positive income regardless of the diversity of financial crises, through renting out the property and benefiting from its returns. Real estate can also be a good way to diversify an investment portfolio.

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What is the best time to buy property during rampant inflation?

The best time to buy property during rampant inflation depends on several factors, including inflation expectations, such as indicators pointing to a possible economic imbalance. In this case, freehold acquisition at this stage would be ideal for those looking to benefit from expected price increases.

Also, monitoring interest rates and plans to raise them will give savvy investors good opportunities to acquire properties during periods of low demand, taking advantage of available discounts at that time.

For further benefit and to know the best times to seize real estate opportunities, it is useful to consult a trustworthy real estate expert, review specialized real estate and economic studies, and keep up to date with real estate news, which Imtilak Real Estate provides you with through its extensive knowledge and specialized articles and studies in the field.

Edited by: Imtilak Real Estate©