Tbilisi (GBC) – Annual inflation hits 20-year record high in Turkey, - according to the Turkish Statistical Institute, In December 2021, the inflation rate in the country reached 36.08%.

In addition, the increase in the producer price index (PPI) for the national industrial products amounted to 19.08% per month , while per year, the rate stood at 79.89%, which led to a sharp price growth for imports.

Due to the increased inflation, the highest price increase has been observed is in the transport sector (+ 53.7% y-o-y), while prices for food products increased by 43.8%.

High inflation in Turkey is due to the depreciation of lira. Experts do not expect that devaluation of Turkish currency will have an impact on GEL, given the positive correlation between the currencies. Experts imply two main factors: Turkey's share in total imports, as well as strengthening trend of GEL against lira.

The exchange rate of the Lira / GEL has some effect on the Turkish-Georgian trade balance, but it should be noted that imports from Turkey primarily compete with imports from other countries. Turkish imports will not be excessive. However, the trade balance depends on GDP growth and not on the exchange rate.

The weakened lira does not lead to an increase in imports to Georgia. It only hikes the share of Turkish imports, thus competing with other countries and not local producers. However, the reasons of GEL's connection with weakened lira are not observed.

As a result of measures taken by the Turkish government, lira strengthened slightly in early January. However, the state still had to increase electricity and gas tariffs for the population and companies.