Minimum wage forecast from economist Prof. Dr. Arzova: 'It won't exceed 30 percent'

The Central Bank has raised its 2024 year-end inflation forecast from 38 percent to 44 percent. The minimum wage hike, which will be determined based on inflation rates, is also a subject of curiosity. Economist Prof. Dr. Burak Arzova spoke to 12 Punto about the planned minimum wage increase rate.

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Minimum wage forecast from economist Prof. Dr. Arzova: 'It won't exceed 30 percent'

The Central Bank had projected in its 3rd Inflation Report meeting of the year that inflation would decline to 38 percent by the end of 2024. Central Bank of the Republic of Turkey (TCMB) Governor Fatih Karahan announced the year-end inflation forecast as 44 percent during the presentation of the 2024 IV. Inflation Report. Following the announced rates, economist Prof. Dr. Burak Arzova spoke to 12 Punto regarding the minimum wage hike that millions are waiting for. Arzova stated that there will be a significant difference between the raise that should be given and the raise that will be given.

“A RAISE ABOVE 30 PERCENT WILL NOT BE GIVEN”

Recalling the message from Central Bank Governor Fatih Karahan that ‘an increase of approximately 25 percent in the minimum wage would be consistent with the 2025 inflation outlook,’ Prof. Dr. Arzova said, “My expectation is that the raise to be given to the minimum wage will not exceed 30 percent. It might be slightly above 25 percent, and they could explain that by saying, 'we have already provided the maximum of our capabilities.' In fact, the inflation for 2024 will be around 45 percent. Therefore, if we foresee the year closing like this, it should have been compensated. A welfare share of 5 points should have been added on top of that. Therefore, it seems there will be a big difference between the raise that should be given and the raise that will be given.”

“THERE IS NO FISCAL POLICY CONSISTENT WITH MONETARY POLICY”

While Karahan, in his inflation assessment, said, "We see that the decline in the main trend of inflation continued in October,” Prof. Dr. Arzova stated, “When we look at it technically, inflation seems to be falling, but if we look at monthly price movements, it is outside the Central Bank's expectations, and prices have increased beyond expectations, especially in October. This time, unlike service prices, goods prices have increased. It is not possible to fight inflation here with monetary policy alone. There is no fiscal policy consistent with monetary policy. We don't know much about what the exchange rate policy is. Therefore, on the public side, there is no austerity measures package to support fiscal policy. The austerity measures introduced were not very realistic. In this process, it does not seem very easy to fight inflation in this way.”

“INVESTORS SHOULD EVALUATE MONEY MARKET FUNDS”

Issuing warnings to investors, Prof. Dr. Arzova said, “Investors should evaluate their money in money market funds. There is a net return of around 4-4.5 percent per month here. When you annualize this, it might remain slightly below the official inflation figure, but it seems to be the best among the current investment instruments. I do not have a positive expectation regarding gold. Because it had already risen excessively. Now it may pull back from there.”

“THE SECOND TERM WITH TRUMP COULD BE DIFFERENT”

Evaluating the impact of Trump's re-election as US President on the Turkish economy, Prof. Dr. Arzova concluded his words as follows:

“One needs to look at bilateral relations during the Trump era. There were periods of good relations during the Trump era, and there was also the letter he wrote to the President threatening Turkey by saying, 'I will destroy your economy,' and we experienced and saw what happened during the Ronald Wilson era. For this reason, the current situation is important in such relations with the US, especially with Trump. When we look at it in general, we are facing a president who manages the country as if he were managing a company, more practically, who gets something in return when giving something, and who tries to do this through commercial relations based on the economy. His second term could be different.”

News Source: Beste Çelik