Turkey intends to raise the minimum wage by 49% in the new year to relieve some pressure on the cost of living before local elections in a country where inflation is poised to exceed 70% in the coming months.
The minimum monthly net salary will be 17,002 liras ($578), Turkish Labor Minister Vedat Isikhan said in a televised press conference in Ankara. This comes in comparison to an increase of more than 100% this year, which was achieved through two amendments that contributed to accelerating the pace of price increases and pushed the cost of labor to rise.
The decision is being followed by credit rating agencies and investors looking for clues about the path of Turkish economic policies after the shift away from unconventional measures in the wake of the May elections, and with municipal elections approaching next March.
More than a third of the country's workforce earns the minimum wage, which is also a reference point for broader salary agreements in the economy.
The minimum wage increase announced by the minister is close to the level that many Wall Street banking institutions warned about, as it would complicate the Turkish Central Bank's efforts to reduce inflation.
Goldman Sachs Group and Morgan Stanley expect the central bank to intensify monetary policy tightening if the minimum wage adjustment exceeds 40%-50%.
Chronic inflation, which last year reached its fastest rates in nearly a quarter of a century, is causing the purchasing power of citizens in Turkey to collapse, prompting the government to raise minimum salary limits to maintain popular support.
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