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Turkey's Erdogan Faces Uphill Battle To Curb 'Exorbitant Prices'

Turkish president Tayyip Erdogan has wheeled a trolley around one of the new grocery stores he hopes will bring Turkey's "exorbitant" prices under control, but his unorthodox effort to combat inflation is failing to impress shoppers and retailers.

Accompanied by his wife and daughter, Erdogan went shopping near his Istanbul home earlier this month, telling assembled media that the expanding chain of Agricultural Credit Cooperatives will help curb price rises.

Frustrated by inflation running near 20% and sliding opinion polls ahead of elections set for 2023, Erdogan has instructed the retail chain to open 1,000 stores to provide cheap, quality products and "balance the market".

Sceptical Shoppers

His government has also pointed the finger at major retailers and investigated potential exploitative pricing in the battle to curb prices.

But as many Turks struggle with the rising cost of living, shoppers at one such cooperative store in Instanbul were sceptical.

"This is just for show, to give the impression that there's a solution. But it's just a lie. I looked at the prices and they're not different from other supermarkets," said businessman Ozgur, 45, as he left the store after purchasing a fruit juice.

Another customer leaving the store in central Istanbul's Sisli district, Gultekin Bora, was also not convinced it was cheaper and criticised the government's response to economic woes.

"They've made a chain of mistakes. The leap in the exchange rate and inflation shows the economy caught a fever due to their economic practices," said public sector employee Bora, 64.

Annual inflation hit 19.6% in September, its highest in two-and-a-half years, with food inflation near 29%. Efforts to lower it now face a fresh challenge as a lira slide driven by monetary easing fuels import prices.

Erdogan said last week Ankara was monitoring "opportunists" who were exploiting the situation to hike prices for profit.

Retailers 'Saddened'

Food retailers have hit back, denying excessive price rises and insisting they were competitive.

"Retail operators are sacrificing profitability and meeting consumers' needs at prices close to cost to minimise consumer reaction," Food Retailers Association chairman Galip Aykac, who is also a board member of major retailer BIM, said at an event on Tuesday.

Such efforts to curb inflation have been tried previously. Turkey opened state markets to sell cheap vegetables in 2019 ahead of local elections, and last month the trade ministry sent inspectors to check supermarkets for excessive pricing.

But analysts say rising prices are primarily the result of the central bank's depleted credibility. Erdogan has fired the last three bank governors and last week sacked three central bankers.

Adeline Van Houtte, European analyst at The Economist Intelligence Unit, said pressuring supermarkets and inspecting prices "has little chance of success and ... further undermines confidence in the government’s economic policies."

Direct Supply From Farmers

Cooperative stores general manager Bayram Ali Yildirim said his company could afford to price products 5% cheaper than other retail chains because they were supplied directly by farmers.

"We are trying to regulate the market. Because we don't lift our prices, other retailers can't raise theirs," he told state-owned Anadolu news agency. His chain aims to open 700 stores by year-end and to reach Erdogan's target of 1,000 stores in the first half of 2022.

Retired 53-year-old Ayten Kar praised the cooperative store as she emerged from it with packets of coffee, describing it as "wallet friendly". But she had little sympathy for a government which she said needed to support poorer people, or go.

"I'm finding it hard to get by. The bills are very high. The pension that we get is inadequate. Rents have surged. The last five years have been really bad," she said.

World food prices rose for a second consecutive month in September to reach a 10-year peak, driven by gains for cereals and vegetable oils, according to the United Nations food agency.

News by Reuters, edited by ESM. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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