A few weeks ago, it was announced that the budget deficit projected for 2023 was 660 billion liras. It was said that 600 billion liras of this was "subsidies" for the electricity and natural gas bills of the citizens. Therefore, the following conclusion can be drawn from here; Although it is considered positive to provide support for energy and heating items, which are one of the important cost items of the citizen, it can be said that it is predicted that the high levels of energy costs will continue in the next year.
The prediction that energy costs will continue to be high can be interpreted as the effect of this on inflation will continue. Considering that the increase in energy costs affects all cost items, the infrastructure of expecting a serious decrease in inflation will collapse by itself. Currently, the difference between the producer price index and the consumer price index has approached 70 points, and it seems too delusional to expect a meaningful increase in consumer prices in the upcoming period.
In the 4th Inflation Report of 2022 announced by the Central Bank, the 2022 year-end inflation expectation, which was 60.40 percent, was updated to 65.20 percent. The inflation expectation for the next year, which was 19.20%, was also increased to 22.30%. In other words, it must be too ambitious to expect inflation to fall to one-third of this year for next year, despite the minor upward revision. Of course, "what will happen, what measures will be applied, this inflation will decrease?" The answer to the question is neither in the government nor in the Central Bank!
Although the Central Bank is experienced in making very drastic revisions in the face of inaccurate predictions! In its first Inflation Report at the beginning of the year, the Center raised its year-end inflation forecast for 2022 from 42.8 percent to 60.4 percent with an update of 17.6 percentage points. At the same meeting, the year-end forecast for 2023 was increased from 12.9 percent to 19.2 percent with an “update” of 6.3 percentage points (ie 50 percent).
If inflation is realized as 65 percent at the end of the year, just as the Central Bank wishes and thanks to the base effect, the wage increase that is planned to be given to the minimum wage at the beginning of the year will certainly get its share. Increasing the minimum wage, which is 5500 TL, to the 8000-9000 TL band, corresponds to an increase of around 50-60 percent, and it is destined for the salaries of all other wage earners to get their share from this. Of course, both Orthodox and Heterodox models, epistemological ruptures and even neuroeconomics will agree that these increases in wages, in order not to "succumb to inflation", will unfortunately lead to an "inflationary vicious circle".
The already targeted budget deficit confirms this. Since 2023 is an election year, the public purse will be opened to the fullest, if necessary, new coins will be printed (which is already being printed), and this process will continue to feed inflation. Temporary decline due to base effect is likely to be replaced by a sharp rise. According to the foresight of common economists, Turkey is dragged into an inflationary process stuck in the 60-70 percent range.
There seems to be a much more serious situation than giving unfounded economic gospels to enthusiastic crowds or "loaded continents" in rally squares. The burden placed on the industry by energy costs, especially electricity usage, continues to increase despite the warnings and screams. As a result of this situation, warnings for 2023 are rising from various sectors. Finally, “S.O.S” is given from textile and ready-made clothing, which are important sectors of Turkey's exports. Both the unbearable energy costs and the pointless policy of "exchange rate suppression", which is continued at the expense of "burning" billions of dollars of reserves and paying billions of lira interest from the budget under the name of KKM, puts the real sector under serious strain. There are loud warnings that the trend will be shift reductions, then layoffs and perhaps shutdowns.
The interesting thing is that those who first got the illusion that they are applying an amazing(!) and unique(!) economic model, are still stubborn that they know the best and shut their ears to all other voices. Knowing how to go the opposite of the world, by not putting forward a concrete action plan against the threat of high inflation, we are driving the car towards the abyss and going into an election atmosphere... May God bless our end!