Last week, the International Monetary Fund (IMF) released a chart on its website, explicating the factors that have impacted inflation during the second half of 2021. Let’s take a look at this chart and evaluate the outlook for the upcoming period.
Energy and food prices under global inflation
The graphic shows how energy prices have almost doubled since last year, triggering inflation, especially in Europe, where prices have skyrocketed. Furthermore, the rise in food prices is another prevalent factor that has sent inflation through the roof.
How has energy impacted inflation in Turkey?
When it comes to energy, Turkey is dependent on imports. This being the case, it is directly affected by the price hikes in energy commodities. Contrary to their steep fall at the beginning of the coronavirus pandemic, energy prices have recently witnessed a rapidly increasing trend. Fuel, natural gas and, connected to this, electricity prices are exacerbating inflation. Today, we’ll take a look at inflation data from January. We’re bound to see higher rates, however, last month's data is extremely significant in terms of giving us a holistic idea of the entire process.
According to Domestic Producer Price Index data calculated by the Turkish Statistical Institute (TURKSTAT), “coke and refined petroleum products” increased by 161.88 percent, while crude petroleum and natural gas went up by 138.51 percent. On the other hand, prices in the electricity, gas, steam, and air conditioning industry sectors witnessed a 117.1 percent hike. This sector makes up a large chunk of the pressures put on inflation. Furthermore, starting from this month, the increase in energy prices, which had to be enforced on December 31 due to global prices, will be reflected in data this month.
What awaits us in the future?
As I mentioned above, the hikes in energy commodities are not specific to Turkey alone. The entire world is suffering its detriments, as energy prices have become one of the main factors behind state inflation. However, it seems that this situation will be irksome for some time to come, as developments over supply and demand, in addition to grave geopolitical risks, push energy prices up. Simmering tensions in Ukraine and the delays in fuel production due to harsh weather conditions in Texas sufficed to raise fuel prices per barrel to 90 dollars. What’s more is that, Wall Street forecasted that fuel prices per barrel will be $100 dollars by summer. JP Morgan, for its part, has already raised its outlook to $125 per barrel.