Turkey raises minimum wage by 49pc amid soaring inflation 

In a bid to alleviate the mounting pressure of soaring living costs, Turkey has announced a substantial 49 per cent increase in the minimum wage for the upcoming year.  

According to Bloomberg, the monthly net minimum salary will now stand at 17,002 liras ($578), as declared by Labour Minister Vedat Isikhan during a televised press conference in the capital.

This move comes at a critical juncture, with inflation projected to exceed 70 per cent in the months ahead, making it a crucial factor in the country’s economic landscape. 

This decision, crucial for over a third of the nation’s workforce earning the minimum wage, marks a deviation from the previous years’ dual adjustments.

Labour Minister Isikhan emphasised the government’s commitment to preventing the workforce from being adversely impacted by inflation. “We fulfilled our promise not to allow our workers to be crushed by inflation,” the minister affirmed. 

The spotlight is now on credit rating agencies and investors seeking insights into Turkey’s economic trajectory. The decision to increase the minimum wage is seen as a significant indicator of the country’s economic policies post the May elections and in the lead-up to the municipal ballot in March.

Analysts from Wall Street, including Goldman Sachs Group Inc. and Morgan Stanley, have cautioned that a minimum wage adjustment exceeding 40-50 per cent could complicate the central bank’s efforts to control inflation. 

The challenge facing Turkey’s economic leadership lies in striking a balance between addressing the cost-of-living crisis faced by the population and avoiding hindrance to the ongoing efforts to slash inflation by nearly half by the end of the next year.

Unlike previous years, where two wage adjustments were made, the government is planning a single hike for 2024. 

Turkey’s chronic inflation, reaching its highest point in almost a quarter of a century last year, has significantly eroded the purchasing power of its citizens. The decision to raise the minimum wages is a strategic move by the government to retain popular support.  

President Recep Tayyip Erdogan, known for advocating cheap money, has revamped the economic leadership team after his re-election in May. The renewed focus is on curbing domestic demand, with the central bank drastically increasing interest rates to counter inflation.  

The central bank projects that inflation will end this year at 65 per cent, peak above 70 per cent in May, and subsequently conclude 2024 at 36 per cent. 

(With inputs from Bloomberg) 

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