ISTANBUL: Turkey will hike electricity and natural gas prices by nine percent from October, Energy Minister Taner Yildiz said yesterday, blaming a weaker currency for the price hikes in the heavily import-dependent country.
The hikes are expected to add more than 0.5 percentage points to inflation, analysts said. Inflation reached 9.54 percent in August, almost double the central bank’s five percent year-end target.
Last week, the central bank left its key interest rates unchanged despite slowing economic growth, as it battles stubbornly high inflation and pressure on the lira in the face of an expected tightening in U S monetary policy.
“We had not foreseen a change in the natural gas and electricity prices when making our 8.4 percent forecast for year-end inflation. After today’s announcement, we are revising our forecast to 9.1 percent,” said Ali Cakiroglu, strategist at HSBC in Istanbul.
Much of Turkey’s electricity is generated using natural gas, meaning the price rise is likely to have a significant impact on household energy bills. Electricity prices to households would rise by an average 8.87 percent and to industry by 6.1 percent, the Energy Market Regulatory Board (EPDK) said in a statement.
“Importantly, as both natural gas and electricity are significant input items for other goods in the consumption basket, we expect to see considerable secondary round effects, which pose further upside risks on our revised forecast at 9.4 percent,” said Gokce Celik, economist at Finansbank.
The secondary effects could mean the central bank would have to take action in order to achieve its official inflation target in 2015, Celik said.
Reuters
