World Economy

High Food Prices Fuel Turkey’s Rising Inflation

High Food Prices Fuel Turkey’s Rising InflationHigh Food Prices Fuel Turkey’s Rising Inflation

Standing amid a jumble of food stalls in an Istanbul market, 61-year-old Gulsen Yuce wonders how she can stretch an already tight budget to make ends meet as food prices rise week after week.

Inflation has become Turkey’s biggest economic challenge, hitting the pockets of ordinary people even as President Tayyip Erdogan and the ruling party have built their reputation largely on economic growth and stability, Reuters reported.

“A head of lettuce is 5 lira and I have difficulty paying that much for it. I live on my own, I get by on fish or poultry instead of red meat,” said Yuce, one of the 10 million Turks who scrape by on pensions as low as 1,000 lira ($330) a month.

Global food prices have fallen to their lowest in nearly seven years, but Turkey has consistently struggled with food costs overshooting headline inflation–at a rate that has at times outpaced other emerging markets.

Ankara’s inability to cool the rise has fueled a blame game among food producers and retailers, with each accusing the other of hiking prices.

Industry officials and economists say there are deeper structural problems, from the lack of a long-term agricultural policy to a supply chain hindered by middlemen and arcane bureaucracy.

“Turkey sticks out like a sore thumb among the major emerging markets whose inflation rates are significantly above target,” said Nicholas Spiro of Lauressa Advisory, an economics and property consultancy.

“There’s little indication that monetary policy will be tightened sufficiently any time soon to curb inflationary pressures, which are particularly prevalent in food despite the sharp decline in global food prices.”

Annual inflation hit 9.58% in January–the highest since the middle of 2014–fueled by an 11.69% rise in food prices, data showed this week. The central bank has hiked its food inflation estimate for this year to 9%, from 8%.

By contrast, South African food prices rose 5.9% last year, just a touch more than the overall inflation rate of 5.2%. Turkey also outpaced Russia, where the food price increase was 1.1% greater than overall inflation.

  Bread and Meat

Central Bank Governor Erdem Basci has cited the surging cost of bread and red meat as the main culprit and asked a government-run food committee to take measures to limit the impact on overall inflation, but it remains unclear what the committee can do. Food and beverages account for the largest portion of Turkey’s inflation basket, at 24%.

The price of a loaf of bread increased in Istanbul by 25% at the beginning of this year, while the annual increase in red meat averaged 21% nationally last year.

The economy minister has said Ankara will allow more red meat imports to keep prices down. But Turkey has already imported about $4 billion in meat and livestock over the last decade and that has done little to fight inflation.

Industry officials and analysts said boosting imports would be a short-term remedy at best. The bigger problem, they say, lies with scattered farm ownership that prevents large-scale farming, outdated agricultural technology and unpredictable harvests borne of poor planning.