Turkey's devastating earthquake will keep inflation above 40% in the run-up to elections scheduled for June and will necessitate an additional budget, a government official and four economists said.
Inflation hit a 24-year high above 85% in October, stoked by a series of unorthodox interest rate cuts sought by Erdogan, before dropping to 58% in January with a favourable base effect.
"Disruption on the production side and the increase in house prices and rents by nearly 100% in some places amid internal migration have extremely negative effects," he said.More than two million people are estimated to have left the quake zone, pushing up rents in other provinces, economists said. The region also accounted for 16% of Turkey's agricultural production last year, so food inflation will be pushed higher.
"Completing the year with the current budget does not seem easy. An additional budget will be needed," the official said.Economists had estimated that the budget deficit to GDP ratio for 2023 would be around 3.5% before the earthquake, but predictions are now rising towards 5%.
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