Turkey: Electricity and natural gas prices increase for households and industry

According to the statement made on its website, Botaş has increased its natural gas prices by 30% for households as of June 1st. Moreover;

·        Natural gas prices were increased by approximately 16% for electricity generation.

·        Natural gas prices for industries were increased by about 10%.

According to the statement made by EMRA;

·        Electricity prices for industries and businesses were increased by 25%.

·        EMRA increased electricity prices for households by 15%.

Energy prices in the world are rising significantly. In this environment, while producers and consumers in Turkey take their share from these global price increases, the problems faced by all manufacturers in the world are reflected as high coefficient hikes when considering the situation on exchange rates and interest rates. The increase in natural gas and electricity will seriously affect inflation on the cost side when compared with the foreign currency equivalent. While the weight of the natural gas fee for residential use in the inflation basket is 1.55%, the weight of the electricity fee is 2.32%. While the 30% hike in the natural gas residential tariff will affect June inflation by 0.46 points, the 15% hike in the electricity residential tariff will have an upward impact of 0.35 points. Thus, the total effect of natural gas and electricity price hikes on June inflation will be 0.81 points directly. When we take into account the indirect cost effects of the increase in industrial consumption and the increase in electricity production, which is separated from it, the total inflation effect will be even higher.

At the point of reducing the pressures on the costs, it is necessary to eliminate the uncertainty over the exchange rate and interest, which also creates problems in the access of the industry to cheap financing, and to improve the economic conditions for this. It is important to establish a policy ground suitable for the factors of inflation and price instability on the economy, so that the cumulative effects from cost channels do not persist and do not heat up inflation further.

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