In the past seven years, Turkey has experienced remarkable disinflation (from an average of 70.4% in the period of 1993-2002 to single-digit rates) as well as a marked decline in the volatility of inflation. As a result of tight fiscal policies and prudent monetary policies, inflation has declined to single digit in 2004.

Turkey’s inflation rate, measured by the consumer price index, declined from an average of 70.4% in the period of 1993-2002 to 6.5% at the end of 2009, the lowest reading in over three decades. During the course of 2009, the CPI inflation rate fell from 10.06% in December 2008 to 6.53% in December 2009.

Over the course of the year, the largest upward contribution came from alcoholic beverages and tobacco. The highest increase was 20.91% in the index for alcoholic beverages and tobacco compared with the same month of the previous year. Miscellaneous goods and services (13.75%), food and non-alcoholic beverages (9.26%), recreation and culture (8.92%), transportation (7.89%), hotels, cafes and restaurants (7.31%) were the other indices where high increases were realised.

In December 2009 within average prices of 449 items in the index, average prices of 67 items remained unchanged while average prices of 223 items increased and average prices of 159 items decreased.

CPI Inflation Rates Through 1993 to 2009

Annual CPI Inflation and Expectations

Inflation Targets and Realisations Through 2002 and 2009

WPI and CPI Inflation Rates Through 1990 and 2009

The preparatory works on the new indices of inflation were completed in 2004. As of January 2005, the Turkish Statistical Institute started using an improved CPI (Consumer Price Index) calculation mechanism which employs an updated basket and relative weights of the goods and services. In parallel, WPI (Wholesale Price Index) was left and instead, a PPI (Producer Price Index) was introduced.

Annual CPI and PPI Inflation Rates Through 2005 and 2009

During the course of 2009, the PPI inflation rate fell from 8.11% in December 2008 to 5.93% in December 2009.

By far the largest upward pressure affecting the change in the PPI annual rate came from the industrial price indices for crude petroleum and natural gas production. In December 2009, the highest increase was 10.27% in the industrial price indices for crude petroleum and natural gas production compared to the same month of the previous year. The other increases in PPI by sub divisions were in the industrial price indices for metallic minerals (2.98%), for basic metal industry (1.86%), for textile products (1.48%), for medical, precision, optical instruments (1.10%), for food products and beverages (0.84%), for furniture (0.78%), for electricity and gas (0.71%).

On the other hand, the largest downward pressure affecting the change in the PPI came from clothing (-2.37%) and leatherwear (-1.30%). Smaller downward pressures came from wood products (-0.87%) and, coke and refined petroleum products (-0.59%) compared to the previous month.

In December 2009 within average prices of 768 items in Producer Price index, average prices of 208 items remained unchanged while average prices of 362 items increased and average prices of 198 items decreased.

Monhly and Annual Inflation Rates Through 2004 and 2009

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