Turkey's Wage Dilemma: Balancing Inflation and Support

Turkey should focus on targeted social support measures instead of another inflationary minimum wage hike this January, IMF mission chief Jim Walsh advises. Citing high inflation risks, he recommends bolstering low-income household support. Turkey's central bank is urged to maintain current rates to stabilize inflation expectations.

In light of rising inflation and previous experience, the IMF's mission chief for Turkey, Jim Walsh, has urged the country to eschew a major minimum wage hike set for January. Instead, the focus should be on social support measures for the poorest section of the population, according to Walsh during the IMF World Bank annual meeting.

Walsh expressed concerns over inflation rates, which, while lower than their peak earlier in the year, still hover above 2%. He emphasized that setting high national wage increases serves as a significant inflation anchor, urging Ankara to enhance cash transfers and targeted governmental aid for low-income households.

The IMF predicts a 24% inflation rate by the end of next year, suggesting policy easing might not commence until late 2024. This view aligns with expectations from a Reuters poll. Additionally, Walsh advocates for increased renewable energy production to counteract potential energy shocks and advises reducing heavy energy subsidies swiftly.

(With inputs from agencies.)