Economist Prof. Dr. Serap Durusoy evaluates the announced figures: 'Expecting a permanent decline in inflation is a utopia if these steps are not taken!'

Şenol ÇARIK   News: 12punto.com.tr

Commenting on the unemployment and industrial production data, Minister of Treasury and Finance Mehmet Şimşek said, “The Turkish economy is much more resilient today and much stronger in terms of macro-financial stability thanks to the gains we have achieved through the program.” Evaluating Minister Şimşek's statements for 12punto, economist Prof. Dr. Serap Durusoy said, “It is quite alarming that broad unemployment is recorded at 28.2%.”

Referring to the 5% monthly and 7% annual increase in industrial production in December, Durusoy stated, “Evaluating this recovery in industrial production as a success of the ongoing program, as a natural result of the interest rate cut process, is both a very premature and a very incomplete assessment.”

ALARMING

Prof. Dr. Serap Durusoy noted the following:

“We are going through days where the data flow is quite intense. Last week, we received the first inflation data of the year and the Central Bank's first inflation report for 2025.

We started this week with unemployment figures and industrial production data. Following this data, statements are coming one after another from the economic management. In a live broadcast program he attended, Mr. Şimşek maintained his usual optimism in his assessment regarding the 2025 inflation data, stating, “Our citizens should rest assured; we plan to pull inflation below 30% this year and approach single digits next year. The decline in inflation will continue. January inflation did not affect our framework regarding the fight against inflation; we have focused on root solutions.” While the government and the CBRT make statements that inflation is under control, the upward revision of the 2025 forecast constitutes the greatest contradiction.

Evaluating the unemployment and industrial production data announced today, Şimşek stated, “The Turkish economy is much more resilient today and much stronger in terms of macro-financial stability thanks to the gains we have achieved through the program.”

EXPECTING A DECLINE IN INFLATION…

According to the industrial production index published by TURKSTAT for December, although there was a strong increase in industrial production with 5% monthly and 7% annually in December, it is quite alarming that the seasonally adjusted unemployment rate remained at 8.5%, youth unemployment was 16.3%, and broad unemployment was recorded at 28.2%.

Evaluating this recovery in industrial production as a success of the ongoing program, as a natural result of the interest rate cut process, is both a very premature and a very incomplete assessment. The reason the assessment is premature is that while interest rates are being lowered to enter a process that supports financial conditions, the policy of tightening financial conditions will continue with the statement that macroprudential measures will continue to be implemented. The reason the assessment is incomplete is that other macro data—such as inflation, unemployment, current account deficit, and budget deficit—reveal the darkness in the economy.

Like Mr. Şimşek, the CBRT also told its success story in a video it published titled Monetary Tightening with Data.

While all these narratives and statements occupy the economic agenda, as long as no convincing action comes from the fiscal policy side, sectoral pricing behavior continues to diverge, and inflation expectations are not anchored, expecting a permanent decline in inflation will be nothing more than a utopia.