Turkey, Turkish lira

Turkish government increases minimum wage by 50%

Erdoğan announced the biggest increase in minimum wage in 50 years in Turkey, coinciding with a new interest rate cut from the Central Bank.

Turkish government announced today a 50% increase in the minimum wage from January 2022, as announced by the President of the Republic Tayyip Erdoğan, while assuring that the economic uncertainty caused by the volatility of the value of the Turkish lira and the increase in prices, will soon come to an end.

As Erdoğan himself explained during a public appearance televised from Ankara, the minimum wage will stand at 4,250 Turkish liras: a measure that will come into force from January 1, 2022, which represents an increase of 50% compared to the previous year, and that it is “the largest increase (in the minimum wage) in the last 50 years“, according to the Turkish president himself.

“I think that with this increase, we have demonstrated our determination not to allow our workers to be crushed by price increases,” said Erdoğan, who acknowledged that “there are some problems right now, and we will overcome them as soon as possible.” The Turkish president also assured that monetary stability will be guaranteed with new measures that will be announced in the coming days, although he did not go into details about what they will be.

Erdoğan also used the occasion to announce some economic measures, such as the abolition of certain taxes on income from enterprises “to ease the burden on entrepreneurs, and eliminate possible effects on employment.” Likewise, he reiterated the determination of his government to “put an end to the recent fluctuation in the exchange rate (of the lira) and the associated exorbitant uncertainty about prices, as soon as possible.”

Turkish Central Bank cuts interest rates again

These measures were announced on the same day that the Central Bank of the Turkish Republic (TCMB) announced a new interest rate cut of 100 basis points, thus reducing the one-week reference interest rate of the Turkish entity to 14%.

Thus, since last September, the TCMB has cut rates by 500 basis points, supporting the policy advocated by Erdoğan of keeping interest rates low in Turkey to stimulate GDP. The Central Bank has also had to intervene up to 4 times in the last two weeks, selling its reserves in dollars to stop the collapse of the value of the lira.

According to data from the Turkish Social Security Office, more than 40% of the country’s workers earn the minimum wage. A year ago, the Turkish government announced days before January 1, 2021, a salary increase, raising the minimum wage to 2,826 liras: a figure equivalent to about 335 euros at the time, but which currently does not reach 165 euros due to the strong devaluation suffered this year by the Turkish lira.