Erdoğan's free gas pledge impacts inflation numbers, undermines wage negotiations

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Turkey's annual inflation rate in May dropped to 39.59%, while consumer prices rose by 0.04% compared to the previous month, according to data from the Turkish Statistical Institute (TurkStat) released on June 5.

This 'relative low inflation rate' is mainly the result of the government's provision of free natural gas, which counteracts price hikes in other products. TurkStat used a "zero price" approach for natural gas in May's consumer price index (CPI) calculations, coinciding with President Recep Tayyip Erdoğan's re-election period.

The government pledged to cover May's natural gas expenses and provide a monthly free allowance of 25 cubic meters until May 2024, with an expected cost of approximately 40 billion TL (1.89 billion dollars).

According to the unofficial Inflation Research Group (ENAG), the official claims about the CPI rate are understated.

ENAG reports a monthly CPI increase of 7.35% and an annual CPI surge of 109.01%, when excluding changes in natural gas prices in May. The consortium of scholars also applied the "zero price" approach for natural gas, akin to TurkStat. Their results indicate a 5.68% rise in May and a 105.45% increase over the course of 12 months.

Wage negotiations, diminished effects

TurkStat's numbers are significant because they influence wage negotiations for the minimum wage in the second half of the year and the salary increment rate for retirees and civil servants, which are all tied to the official inflation rates.

"The June 2023 inflation will be lower than expected and experienced. Thus, workers who will receive wage increases based on the six-month inflation rate in July 2023 will suffer significant losses," the Confederation of Progressive Trade Unions (DİSK) announced in a statement, further explaining that the partial or complete coverage of the natural gas cost by the treasury is a form of a subsidy. However, if this subsidy is not accounted for in inflation calculations, it can diminish the positive impact on income.

''Deducting such supports from inflation calculations means taking back the additional income generated by these supports through inflation calculations and renders income supports meaningless," the trade union additionally clarifies.

TurkStat under public scrutiny

Critics and experts have accused TurkStat of manipulating the inflation rate over the past years, alleging that the official statistics agency consistently underreports the actual inflation numbers.

Two years ago, the statistical institute stopped publishing the inflation basket, which consists of average prices for over 400 items and forms the basis of inflation calculations.

Despite a recent lawsuit won by DİSK, TurkStat continues to withhold the inflation basket. An action that ''plays with the incomes of millions of working people,'' according to the trade union. (HA/TY/WM)