- Turkish Lira depreciates, making life challenging with double-digit inflation.
- Skimpflation and Shrinkflation are new economic terms explained by Mahfi Eğilmez.
- Both phenomena deceive consumers, hiding true inflation and reducing product value.
In the new year, the Turkish Lira continues to lose value against the dollar, surpassing 30 TL. Double-digit inflation and the exhausting cost of living are quite challenging for those living in Turkey. Today, popular Turkish economist Mahfi Eğilmez announced the beginning of a new era, but what does this mean?
Global Inflation and Turkey
While the US is trying to reduce inflation to 2%, the perceived inflation is still quite high there. In developing countries like Turkey, inflation has caused prices to rise continuously for a long time. Mahfi Eğilmez talks about different inflation scenarios forming in different parts of the world today.
What is Skimpflation?
Eğilmez wrote that one of these scenarios is Skimpflation. We can describe it as an environment where the price of a product remains the same, but its content and quality are reduced, meaning a less valuable good is sold at the same price.
During this period, goods that seem unaffected by inflation actually experience a false period of neutral inflation. This can be interpreted as the producer seriously reducing costs to balance their profit instead of a price increase, due to concerns about falling sales. Mahfi Eğilmez explains this with the example of Tere butter being sold for 600 TL with 10% Margarine added and sold at the same price.
What is Shrinkflation?
This is similar to the first and we have actually been experiencing it for a long time. In Shrinkflation, the price of the good remains the same, but there is a reduction in the weight or volume of the product. For example, this has been a widely discussed issue on social media with glass buttermilk. Or in other packaged products, such as biscuits, we have often seen this done with reductions of about 10-15 grams.
A baker who sells 250 grams of bread for 10 TL, while reducing it to 225 grams and selling the 9 TL product at the same price, seems to keep the price stable but has actually increased the price of the bread.
In both cases, a significant problem arises that is detrimental to consumers. While sellers continue to make similar turnovers, the official inflation figure seems to be falling. This creates a bad environment where workers are unable to receive the true value of their labor. Employees and retirees, whose wages are eroded by inflation, are also forced to buy less goods for the same amount of money.
In the final section, Mahfi Eğilmez says that if the fight against inflation is to be waged, it is necessary to accept what “real inflation” is and develop policies accordingly. Without these, increasing interest rates and indirect taxes will not be effective in curbing inflation, he emphasizes.