Page 32 - TURKRptOct19

4.2.1 CPI dynamics
Turkey’s state-run pipeline company BOTAS hiked natural gas prices by 14.97% for residential and industrial users as of September 1.
The hike comes on top of a similar price increase already put into effect in August. BOTAS on August 1 increased the gas price by 14.97% for residential users and 13.73% for industrial users.
The price hikes hit companies already suffering from weak domestic demand. Observers say the government was forced to increase gas prices to plug the swelling budget deficit.
The government has taken this very unpopular measure just ahead of the winter surge in people using natural gas for heating. Households in Turkey spend a considerable chunk of their budget on natural gas.
Erdal Bahcivan, head of the Istanbul Chamber of Industry, called on the government to reconsider the price hike.
“We are aware that the natural gas prices need to be adjusted depending on developments in the international markets. However, the latest hike did not allow us some time to make necessary preparations and once again caught us off guard,” Bahcivan said in a statement.
Natural gas price’s weight in the inflation basket is 1.8%.
It is likely that the base effect encouraged the government to go ahead with the unpopular gas price rises as officials can see some room for them because of it.
Starting from November, the base effect will reverse, but the accuracy of TUIK's inflation calculations amid Turkey's lira crisis-triggered economic strife has been under the microscope and has prompted opposition objections in parliament - observers expect the government may very likely deliver more good-looking headline figures whatever inflation experts say should realistically be anticipated.
Mainstream research reports take the official inflation figures as a given. They do not question how it is that inflation is falling amid the tax and price hikes that are proliferating in Turkey.
The explanation for the strengthening lira, meanwhile, is taken to be the better-than-expected inflation but the portfolio inflows data do not support this argument.
32 TURKEY Country Report October 2019 www.intellinews.com