(Bloomberg) -- Turkish President Recep Tayyip Erdogan pledged that minimum wage increases will continue to outpace inflation next year and that workers’ purchasing power would be safeguarded amid lingering price pressures.
The pay hikes will be likely a key determinant of inflation in 2025. Wage restraint would signal the authorities’ commitment to reining in price pressures, and investors are hoping for a measured increase that will align with the central bank’s projections of the inflation rate falling to 21% by the end of next year.
Negotiations on the raises are set to begin in December. Erdogan, who holds the final say, has previously implemented steep increases to win favor with voters.
The minimum wage was increased by 107% in 2023 when the year-end inflation rate was 65%. It was raised by 49% this year, five percentage points higher than the final inflation rate projected by the central bank, according to Erdogan.
The government will adopt a similar approach for 2025 and “ensure the purchasing power of our working population is protected,” he told reporters on Wednesday on his return from the G-20 summit in Brazil.
Deutsche Bank AG economists say investors are looking for minimum wage increases of about 25% to keep price growth in check and would be alarmed should they exceed 30%. Morgan Stanley sees inflation ending this year at 44.5% and 2025 at 26%, with the latter assumption based on a 30% hike in minimum pay.
More than a third of the country’s workforce earns the minimum wage, which is also a reference point for wider salary agreements in the economy. The monthly net minimum salary is currently 17,002 liras ($493).
Erdogan also reiterated Turkey’s goal of reducing inflation to single digits, calling it the ultimate path to improving living standards. While inflation has slowed from its peak of 75.5% earlier this year to 48.6% in October, rising living costs remain a pressing issue for households.
This issue has led to growing calls for raises to be based on actual inflation rather than forecasts. Last month, a group of economists released a joint statement urging the government to tie minimum wage increases to realized inflation to better reflect workers’ needs.
--With assistance from Beril Akman.
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