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Turkish gov’t asks retailers to implement price freezes ahead of elections

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Turkey’s finance minister, Nureddin Nebati, has asked clothing and shoe stores to launch their discount season ahead of the usual March date, following a similar request made to grocers, Reuters reported.

The country’s largest market chains have begun a month-long price freeze, and some have cut prices this month.

However, Yavuz Altun, chief executive of the 200-store chain Happy Center, said discounts for shoppers would depend on how much more the chain had to pay its suppliers.

“We could accommodate hikes up to a certain point; however, there is a limit,” Altun was quoted by Reuters as saying.

Annual inflation in Turkey hit a 24-year high of 85 percent last year, and prices were up 64 percent year-on-year in December.

The cost-of-living crisis is a top concern for voters ahead of a tight vote in May, and the government has sought to soften the impact with record spending on social aid and a 55 percent minimum wage increase since July.

The pressure on retailers is the latest attempt to rein in price growth without touching interest rates, which President Recep Tayyip Erdoğan insists – at odds with mainstream economists – must be low to bring inflation down.

The central bank held its key rate at 9 percent on Thursday. It is unclear, however, how long the retail price cuts will last. “For now, the stable lira is supporting us and could allow discounts of 10 to 30 percent until March,” Altun was quoted as saying. “However, albeit minimal, the increase in minimum wages will lift prices.”

Nebati stated earlier this month that he was pleased to see that some market chains had responded to his calls for discounts. He went on to say that he is now calling on all retailers to take similar steps.

Due to pressure from the government, Turkey’s largest market chains, including A101, BİM, Carrefoursa, Migros and ŞOK, have frozen or cut prices of hundreds of products for January. An industry body representing 5,000 local markets also followed suit.

However, after years of high and volatile prices, some shoppers are looking for more permanent solutions.

“There are no discounts on staple items like cheese and meat, which are still too expensive,” Müjgan Aşkan, 49, from the western city of Kırklareli, was quoted by Reuters as saying. She added that the discounted products are also hard to find.

Şeref Fayat, head of the TOBB apparel industry council, said the aggressive interest rate cuts have boosted demand and may end up driving up prices by up to 30 percent instead of cooling them.

He said price cuts are not possible at this time, especially as the country is approaching elections and monetary easing is everywhere. He added that after the minimum wage hike, retailers will want to take advantage of the relative increase in purchasing power and reflect rising costs in price tags, which they have not yet done.

Analysts say it is difficult to judge how discount campaigns will affect voters.

“The impact will mostly be psychological,” Adnan Akan, retail and consumer leader at PWC Turkey, was quoted by Reuters as saying.

“January is the month for wage hikes. Think of price freezes like a booster for purchasing power. Looking from the government’s point of view, it is a smart choice.”

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