Price hikes ring in fall

ISTANBUL - Hürriyet Daily News

The price of electricity in home usage has been hiked by nearly 10 percent. Hürriyet photo

Electricity and natural gas prices were increased nearly 10 percent, effective from yesterday, triggering concerns about further price hikes of industrial and agricultural products and lifting year-end inflation estimates.

The latest price hikes came on the heels of hikes in the special consumption tax, first in fuels and then in automobiles.

Electricity prices have increased between 4 and 9.8 percent, officials from the energy regulator EPDK said Sept. 30, according to Anatolia news agency. The household electricity price was hiked 9.8 percent on average, to 35.7 kuruş per kilowatt-hour. The electricity price for medium voltage industrial subscribers was hiked 4 percent, to 27.7 kuruş per kilowatt-hour. For mercantile establishments the price was up by 8 percent, to 35.9 kuruş.

The state-run pipeline company Botaş said yesterday in a written statement that natural gas prices had also been increased, lifting the end-user price by 9.8 percent. The price hikes stemmed from increases in international crude oil and oil product prices, according to the statement.

Economists expect price hikes in all industrial goods including food, as electricity and gas are the main inputs in production.

Taner Berksoy, a renowned economic professor at the Okan University, told hurriyet.com.tr yesterday that the price increases in natural gas and electricity would cause further hikes in the prices of industrial products and foods.

“I think this will have two significant impacts. First, it will cause a stopover in expenditures and a fall in domestic consumption, as the income of citizens does not increase at the same level. The second impact will be on costs. Both price hikes increase costs directly,” he said, adding that the pressure on inflation would be increased.

Target maybe missed

The price hikes may lead to a 1 percentage point increase in year-end inflation and will make it more difficult for the interest rates to fall, according to Burak Saltoğlu, an economist at Istanbul’s Bosphorus University.

“As an external factor, [price hikes] may cause a higher rate in inflation than the Central Bank estimates and a slight loss in the credibility of the Bank. On the markets side, increasing inflation will make it harder for the Central Bank to reduce the policy rate,” he said.

The Central Bank’s year-end inflation target has stayed at 6.2 percent.

Erdal Tanas, the economy director at the Foundation for Political, Economic and Social Research (SETA), said the electricity price hikes may increase the year-end inflation by 1 or 2 percentage points above the official target.

“It is a choice between achieving the inflation target and maintaining the budget balance. The government chose the latter, which is in my opinion the right decision,” he said.

Opposition political parties criticized the recent price hikes. The burden of the government’s mismanagement is increasing every day, main opposition Republican People’s Party (CHP) deputy leader Faik Öztrak said in a written statement, according to the Anatolia news agency.

Following the latest hikes, the increase in natural gas prices in the last year is at 30.4 percent, while electricity prices have increased by 20 percent, said Öztrak, adding that price hikes including gasoline impoverished the citizens.

Turkey has now become the country that consumes the most expensive gasoline in the world because of successive price increases, the latest of which came over the weekend. One liter of gasoline now sells for 4.83 Turkish Liras (2.08 Euros).