In Turkey unemployment rate edged up to 10.2% in October, data showed on Monday, posing a potential challenge to President Tayyip Erdogan’s re-election hopes next year, although inflation is expected to decline and the currency remain largely stable.
Economic growth is also expected to continue to cool below trend levels ahead of presidential and parliamentary elections to be held in May or June, more than 20 years after Erdogan and his AK Party came to power.
Turkish officials and analysts have said jobs and GDP are election wildcards for the president, whose pro-growth political reputation has taken a beating in recent years as inflation soars and the lira was at historic lows.
“Especially before the elections, employment is a problematic situation,” said a senior Turkish economy official, who requested anonymity to speak openly.
In response to the currency’s collapse a year ago, authorities adopted a policy of strict foreign exchange controls, and officials expect the lira to remain stable until 2023.
Another relief for Erdogan, whose vote is tight according to the polls, annual inflation should drop to around 40% by the elections, against 85% currently.
JPMorgan analysts expect inflation to hit 40% by mid-2023 and then rebound largely on fiscal stimulus ahead of the vote. They said inflation “has had a massive impact on real wages”, adding that they will depend more on an expected rise in the minimum wage.
Unemployment in Turkey : The government expects inflation to be close to 20% by the end of 2023
The jobless rate rose 0.1 percentage point month-on-month to 10.2% in October, from its lowest level in more than four years in August (9.8%), according to data from the Turkish Statistical Institute.
In Turkey, youth unemployment has climbed almost two points to just under 22%, a potential concern given that there will be six million voters for the first time next year and a large majority of young Turks say they want change.
Adding to employment pressures, a sharp rise in administered wages could lead to layoffs early next year, as economic growth begins to wane after a 3.9% annual expansion in the third quarter.
“There will probably be weaker growth in the last quarter compared to the third quarter. But the main problem is the first quarter of next year under the current conditions,” said the head of the economy.
Four analysts polled by Reuters expect inflation in May to be in the 35-43% range unless the lira depreciates further.
Annual consumer price inflation was just below 85% in November after hitting a 24-year high a month earlier. It is expected to fall sharply due to the base effect at the end of the year and the drop in global energy prices.
The lira fell 44% against the dollar last year and has weakened a further 29% this year. However, it has remained stable since early October.
