Due to free gas decision… Optimistic expectations of inflation in Türkiye

The lira crisis increased the level of inflation in Türkiye

The Turkish Statistical Institute said it would take into account the government’s decision to provide free natural gas to households in May when calculating inflation, and that the move would have a “significant impact” on reducing the inflation rate in May.

In April, President Recep Tayyip Erdogan promised free gas in May ahead of parliamentary and presidential elections this month. Erdogan won the new presidency after Sunday’s second election.

Erdogan also said the government will provide 25 cubic meters of natural gas to households for free for one year starting in May.

The Turkish Statistical Institute said on Monday evening that the “zero price” method would be used for natural gas in consumer price inflation accounts in May, while free gas would be reflected in next year’s accounts.

However, the company said there will be a strong upside impact towards the end of the year, paralleling the increase in natural gas consumption.

Natural gas weighs 2.9 percent in the inflation calculation. Inflation data for May is due on June 5.

Hakan Kara, an academic at Bilkent University and former central bank chief economist, said on Twitter that the Turkish Statistical Institute may report zero or slightly negative inflation after deducting 2.4 points from May’s inflation rate thanks to free natural gas.

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