Turkey has entered the 2023 with a big hike in country’s minimum wage. As announced by the Turkish President Recep Tayyip Erdoğan in the second half of December 2022, the Turkish minimum wage has been raised to 8,506.80 lira per month, starting from January 2023. This is an increase of 55% on the July 2022 level and double the rate from the start of 2022. In dollar terms, the latest increase brings the minimum monthly wage to USD 454, vs. USD 312 one year ago (4,253 lira per month at the start of 2022).
The hike in the minimum wage comes amid soaring inflation in Turkey. Turkey’s inflation peaked in October at 85.5%, a 24-year high, but has since fallen to 64.3% in December. The decline is mainly due to favourable base effect as consumer prices were already rising rapidly at the same time last year. In December 2021, the annual rate of inflation reached 36% and rose by 13.6% month-on-month (m-o-m).
The soaring inflation has been fueled by a currency crisis, as the Turkish lira has plummeted against a basket of currencies amid the unorthodox low interest rate monetary policy. Despite the soaring inflation, the Turkish Central Bank continues to slash interest rates, with the last cut coming in November last year, taking the one-week report rate down to 9%, from 15% one year ago. The Turkish President continues to argue that slashing interest rates will boost domestic economic growth.
The latest increase in the minimum wage will undoubtedly raise production, processing and logistics costs across many industries. In the nut and dried fruit category, market participants said that sellers have already priced in the wage hike. The Mintec Benchmark Prices for Turkish sultanas and hazelnuts have increased since the announcement was made in December. For both commodities, the bullish market sentiment has been further fueled by the extensive Turkish Grain Board (TMO) procurement. By the end of the year, the TMO is estimated to had purchased 93,000 tonnes of sultanas against a production of approximately 320,000 tonnes during 2022/23.