Turkey's inflation rate soared to almost 25 per cent in September as the country battles a continued currency crisis, the Turkish Statistical Institute revealed today.
Marking a sharp rise of nearly 18 per cent compared to the previous month, the increase was higher than expected, prompting the Turkish lira to fall another 1.44 percentage points following the news.
The spike in prices was primarily driven by huge rises in transportation costs, which icnreased 37 per cent in comparison to last year, as well as food prices, that increased 28 per cent. Miscellaneous goods and services rose 31 per cent.
Inflation was also worsened by the trade sanctions US President Donald Trump placed on Turkish products, specifically steel and aluminium, in response to Turkey's refusal to release an American citizen who Ankara is holding on terrorism-related charges.
READ: Turkey to keep up trade ties regardless of US sanctions
Turkey has battled with a currency crisis over the past several months; the lira has lost around 37 per cent of its value against the dollar since the start of the year, increasing the costs of basic goods and putting pressure on families struggling to make ends meet.
After months of speculation and international urging, the central bank raised interest rates last month in an attempt to control inflation, against the stated preferences of Turkish President Recep Tayyip Erdogan. The country's central bank raised interest rates from 17.75 per cent to 24 per cent, implementing the first major change in the rates since April in order to stabilise and strengthen the Turkish currency against the US dollar.
In response to the latest figures, Turkey's Finance Minister Berat Albayrak said that the government would be announcing the measures it will take to tackle inflation next week.
Last month, the government released a medium-term plan to tackle the country's economic challenges, downgrading growth for the first time from 5.5 per cent to 3.8 per cent this year and 2.3 per cent in 2019. The lira rallied briefly on the announcement with the plan met with praise from industry leaders.
"We will see a gradual growth increase from now on. Our main goal is to establish five per cent growth from 2021 onwards," Albayrak, who is also Erdogan's son-in-law, told attendees at a presentation in Istanbul. "We are aware of the economy's strong and weak points."
READ: Turkey's Erdogan seeks better economic, political ties with Germany
Global institutions have repeatedly warned that Turkey's economy is overheating, after years of strong growth driven by tax cuts, government incentives – particularly in the construction sector – as well as excessive borrowing for large scale projects.
Albayrak said in his presentation that investment projects for which the tender process has not been finalised will be suspended, a sign that some big-ticket government projects could be put on hold.
He added that Turkey would prioritise investments in pharmaceuticals, energy and petrochemicals to reduce its current account deficit, which was seen falling to 2.6 per cent of gross domestic product by 2021 from 4.7 per cent seen in 2018.