Erdogan Secures Another Five Years as Lira Plummets to Record Lows
The incumbent Recep Tayyip Erdogan has secured another five years as Turkey’s president following a run-off election which saw him take 52% of the votes, against Kemal Kilicdaroglu’s 48%
Kilicdaroglu, who was two million votes short of Erdogan has not explicitly conceded, calling the election the “the most unfair election in recent years”. While Kilicdaroglu performed strongest in metropolitan areas including Istanbul, Antalya and Ankara, Erdogan secured votes in Turkey’s central areas.
The elections come against a backdrop of increasing political and socio-economic polarisation in Turkey. Since becoming prime minister in 2003, Erdogan has successively consolidated power and in 2017 (three years after becoming President) abolished the office of the Prime Minister – further increasing his grip on power following a failed coup d’état.
The elections also come as Turkey faces inflation above 40% with Erdogan’s party rejecting conventional monetary policy, having loosened their monetary policy despite soaring inflation.
Indeed, in Erdogan victory speech, the leader of the AK party said that inflation was still the country’s most important issue, though some analysts are warning that any continuation of monetary loosening will require stricter capital controls to combat inflation. The Turkish lira is now trading close to record lows against the dollar with economic uncertainty weighing on investor sentiment.
Downing Street Proposes Supermarket Price Cap
The government is looking into the possibility of implementing a voluntary price cap on some basic and essential products at the supermarket as it attempts to deal with rising costs at the tills. While the plan is merely in the “drawing board stages”, it will involve the government asking retailers to charge the lowest possible amount on some items including bread and cheese. No doubt the government will be keen to cut costs on some items in the ONS’ basket of goods, as inflationary pressures continue to send treasury gilts soaring, driving up the cost of government borrowing.
The plan has been implemented in France and has been seen as one possible way to ease financial pressures on households dealing with the rising cost of living, and falling real wages. For example, The Telegraph notes that “In France, the supermarkets that signed up to the deal with the government each identified items in their own shops that would be subject to price freezes or reductions. In many cases own-brand items were selected on the basis that retailers found it easiest to control their costs.” Some critics say that any such plans would be anti-market and an overstretch on government involvement, and reminiscent of the supermarket prices since controls established by Edward Heath in 1973.
Over April, the food price index hit its second highest level in 45 years – at 19.1% – with the largest contributor being the increasing cost of bread and cereals. This comes as 44% of adults are saying that they are reducing their outgoings on shopping, buying less on food and shopping essentials as the rising cost of living continues to hit households across the country.
BRC Index Hits Fresh Highs
The British Retail Consortium’s shop price has hit 9%, surpassing expectations of 8.8% – its highest level since 2005. This comes as food price inflation showed some signs of subsiding slightly, as the index hit 15.4%. The BRC cited easing energy and commodity costs as the key drivers behind easing inflationary pressures on food.
Gas Prices Extend Losses
Energy prices across the continent are continuing to fall this morning, raising hopes that it will cool inflationary pressures throughout the eurozone. TTF gas futures – the European benchmark – have continued to retreat this month and are now trading just below 23 EUR/MWh. This marks a 75% fall on an annualised basis and follows a tumultuous year in the gas markets which saw TTF gas futures rise to over 330 EUR/MWh last August. Pressure on gas prices have continued given bets on lower demand following softer-than-expected growth in Germany, whose economy is now in a technical recession.
Gas storage also continues to remain high relative to the time of year and is currently at 58% across the EU as LNG imports from the US continue to rise. Gas storage is currently well in excess of the five-year average of 34% and comes as the EU has set another target to have storage at 90% capacity before the 1st November. Accordingly, the EU Energy Commissioner Kadri Simson said that the EU is in a “good position to enter this winter with confidence”.
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