Erdogan’s free gas giveaway could turn Turkey’s monthly inflation negative

Turkey may post its first month-on-month negative inflation in more than four years, giving newly reelected President Recep Tayyip Erdogan an early boost as he seeks to shore up confidence in the economy.

The official statistics office TurkStat said on Monday it would record household gas prices as zero in May, after Erdogan fulfilled an election pledge to give free natural gas to households for the month.

TurkStat expects “strong” downward impact on the consumer price index basket in the June 5 data, in which “city gas and natural gas” carries just under 3% weight.

“This raises the possibility of a negative monthly print,” said Erol Gurcan, chief economist at Istanbul-based Yatirim Finansman Securities. Annual inflation may slow to less than 40%, down from April’s 43.7%, he added.

Turkey last reported negative monthly inflation in December 2018. It’s averaged at 3.1% over the past year.

Annual inflation peaked in October at 85.5% and has been slowing since, largely on falling energy costs and the so-called base effect of comparing prices with the previous year’s rapid gains.

Erdogan, Turkey’s country’s longest-serving leader, was reelected on Sunday with 52.2% of the popular vote. –BLOOMBERG