Prof. Binhan Elif Yılmaz: Erdoğan's election promise eroded wage hikes
TURKSTAT treated the natural gas that Erdoğan promised as "free" before the general elections as "zero" in the May inflation figures. In November, when natural gas usage increased, it calculated the price as lower than in previous years. Prof. Dr. Binhan Elif Yılmaz commented on the impact of TURKSTAT's natural gas calculation on inflation and subsequent wage increases. Yılmaz stated, "If it weren't for the free natural gas, wage increases would have been higher. The impact on the July 2023 wage hikes will also partially manifest in the January 2024 increases."
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According to the Turkish Statistical Institute (TURKSTAT), inflation in November was 3.28 percent, with an annual rate of 61.98 percent. Citizens continue to pay the bills for the natural gas that AKP Chairman and President Erdoğan announced as a "free" gift before the general elections. Prof. Dr. Binhan Elif Yılmaz, a faculty member at the Istanbul University Faculty of Economics, Department of Public Finance, explained TURKSTAT's inflation calculation and its impact to Medyascope.
YEAR-END INFLATION FORECAST MAY BE MET WITH NATURAL GAS CALCULATION
The natural gas calculation, which zeroed out TURKSTAT's inflation in May, was also effective in limiting the increase in inflation in November—when usage for heating increased—because TURKSTAT used a lower average price for natural gas. With TURKSTAT's calculation, the forecast that inflation will be 65 percent at the end of 2023, as stated in the Medium-Term Program (OVP) and the Central Bank of the Republic of Turkey (TCMB) report, may be met.
"TURKSTAT HAD ANNOUNCED THAT THE NATURAL GAS CALCULATION WOULD PULL INFLATION DOWN"
Binhan Elif Yılmaz recalled TURKSTAT's calculation regarding natural gas bills that were not reflected to consumers in May as follows:
"On May 29, 2023, TURKSTAT announced that natural gas bills for May would be zeroed out in the inflation calculation and stated that this practice would be a strong factor in pulling inflation down. The fundamental reason for this development was the Presidential Decree dated May 1, 2023, which made natural gas free for residences, places of worship, and cemevis between April 24 and May 31, and stipulated that up to 25 cubic meters of natural gas would not be billed in invoices accrued after this date until May 1, 2024."
"If it weren't for the free natural gas in May, wage/salary increases would have been higher"
With the natural gas calculation affecting the wage increases to be made in July, the inflation for the first six months of 2023 remained at 19.77 percent. Yılmaz stated that natural gas is an item included in the housing main expenditure group in the Consumer Price Index (CPI) basket and that its weight in the basket is 2.88 percent, and continued as follows:
"The average price per cubic meter used by TURKSTAT for natural gas in its CPI calculation fell from 5.72 TL in April 2023 to 0 TL in May 2023, and thus, when the '0' priced natural gas took its place in the index, May inflation was realized at 0.04 percent. If it weren't for the free natural gas in May, the first six-month wage/salary increases for employees and retirees would have been higher, but they were not; the salary increase remained below expectations."