Turkey raises the minimum wage by 30% - The decision favors investors and aims to reduce inflation
Turkey raised the minimum wage by 30% by 2025, offering relief to investors looking for concrete steps to reduce populist policies and curb the world's highest inflation rates.
The minimum monthly salary has increased to 22,104 liras for 2025 from 17,002 liras that was before, the Ministry of Labor announced. The increase was in line with market expectations. More than a third of the workforce is on minimum wage, which also serves as a benchmark for other wages.
Investors had warned that any increase above 30% could overturn inflation forecasts set by the central bank and complicate the first interest rate cut since February 2023. The minimum wage is seen as one of the main determinants of Turkish economic policy.
"Given that the salary has been adjusted in relation to the expected inflation for 2025, this will make the life of the central bank easier", experts explain.
They expect price growth to slow to 21% at the end of next year from the current 47.1%. The central bank's Monetary Policy Committee will announce its interest rate decision on Thursday, with most economists polled by Bloomberg expecting a 50% cut.
President Recep Tayyip Erdogan, who has the final say on the decision, has dramatically raised wages in the past to win over voters struggling with one of the worst cost-of-living crises in decades. This has boosted domestic demand, making price control more challenging for the central bank.
Since his re-election in May last year, Erdogan has put in place a new market-friendly team to repair the damage caused by ultra-low tariffs. The team quickly raised borrowing costs to 50% and won the praise of foreign investors.
However, officials have had a hard time convincing local businesses and households that they will rein in prices and restore prosperity.
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