Turkish consumer prices leapt 37.5 percent in the year to March, official data showed Tuesday, April 3, in an early sign of the fallout from a financial crisis in February. Consumer prices were up 6.1 percent in March from the previous month, the state statistics institute said.
But economists said the price rise was more subdued than they had feared after the government decided to float the currency in February in the midst of a financial storm.
Wholesale prices were up also up sharply, rising by 10.1 percent in March from the previous month and by 35.1 percent from a year earlier, the state statistics institute said.
The Turkish government is drawing up a revised economic program, including a new inflation target, which had originally been put at 12 percent for the end of 2001.
The inflation figures for March alone were higher than the monthly price increases recorded last year but not as bad as had been feared, one economist told NTV television news.
"The increase is definitely lower than expected, some two-three points lower than the average estimations," economist Berna Beyazitoglu said. This was possibly because of contracting demand.
"This month's figures do not mean that inflation will turn out to be lower than the expectations in the upcoming months," she added. "Plus we cannot judge the state of the economy by looking at a single figure."
A foreign analyst agreed that the rates seemed very low compared to the rising prices faced by Turks since the crisis. "I expected inflation to turn out at 10-to-15 percent. But this is good news," he told AFP.
Turkish Economy Minister Kemal Dervis, a former World Bank vice president who was brought in to lead the recovery efforts, had said inflation would be high in March and April and would start decreasing in June.
Government officials have said that inflation is likely to be running at 25 percent at the end of 2001, but experts have warned the figure could reach as high as 40 percent. Turkish inflation stood at 39 percent last year.
A financial crisis in February, the second in three months, led the government to float the Turkish lira on February 22. The currency then lost more than a third of its value against the dollar.
The flotation of the lira disrupted an IMF-backed disinflation program in place since December 1999 and pushed prices up, making the revision of macro-economic targets inevitable.
Ankara is now outlining a package of economic reforms, including a supplementary budget to cover the cost of rising prices and additional expenditures.
The country is in a desperate need of foreign aid, which Dervis put at $0-$2 billion. But the International Monetary Fund and foreign creditors have made it clear that they could extend a helping hand only after Turkey drafts a credible program of reforms.
Ankara is planning to finalize the revised plan by mid-April and submit it to the IMF for final approval in late April. In the meantime, the government has to boost its credibility by passing a series of legal amendments, aimed primarily at reforming the ailing banking sector and speeding up privatization, Dervis has said.
Last week the minister appealed to parliament to adopt 15 priority bills within several weeks to show the international financial circles that Turkey is earnestly carrying out far-reaching reforms.
Last year Ankara dragged its feet on some reforms in the original IMF-backed program, triggering a massive flight of foreign capital in November and an ensuing liquidity crunch, which only was alleviated with emergency IMF aid.
The government's subsequent failure to come to grips with the problems and an unprecedented public row between Prime Minister Bulent Ecevit and President Ahmet Necdet Sezer over corruption in February led to a complete breakdown of confidence. — (AFP, Ankara)
by Sibel Utku
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)