Turkey’s official inflation rate hit its highest level in 20 years as soaring energy and food prices compounded the economic challenges facing President Recep Tayyip Erdogan.

The consumer price index rose 61 percent year-on-year in March, up from 54 percent in February and the highest level since March 2002, according to data from the Turkish Statistical Institute.

Food costs, which make up about a quarter of Turkey’s inflation basket, rose 70 percent year-on-year. Energy costs rose nearly 103% and transportation costs rose 99% as Russia’s invasion of Ukraine led to higher commodity prices, taking a toll on the country that imports nearly all of its oil and gas supplies.

The producer price index, which reflects manufacturers’ costs, rose nearly 115% year-on-year, separate data released on Monday showed.

Responding to the inflation figures, Finance Minister Nouriddin Nebati said his country was going through an “extraordinary period” due to the two-year coronavirus pandemic and subsequent war in Ukraine.

Opposition politicians claim that the real inflation rate is even higher than the official figures. Ali Babacan, a former economy minister who is now the leader of the opposition, described the price increase as “out of control”.

The opposition Republican BJP MP Veli Agbaba said the country was “step by step towards hyperinflation” – usually defined as annual inflation exceeding 50% for several months.

Analysts at Goldman Sachs said they expect prices to rise more than 65% “and stay above that pace for much of 2022” before falling to around 45% in December.

Even before Russia invaded Ukraine Commodity prices soarTurkey is grappling with the highest inflation since Erdogan’s party came to power nearly 20 years ago.

In the final months of last year, the central bank slashed benchmark rates in total as Erdogan, the self-described “enemy” of high interest rates, ordered policymakers to prioritize economic growth amid mounting price pressures. 5 percentage points.

opinion polls show Rising cost of living hits support For the Turkish leader, much of his early electoral success was built on bringing economic prosperity to millions. But Erdogan rejects the established economic orthodoxy that higher interest rates help lower inflation, and he refuses to allow the country’s central bank to raise borrowing costs.

With the central bank’s benchmark lending rate set at 14%, real interest rates will remain at -47% once inflation in March is factored in.Deeply negative real interest rate risk further exacerbated Lira pressureThe ruble is the worst-performing emerging market currency so far this year, down about 9 percent against the dollar.

MUFG warned that the latest inflation data would “further undermine confidence in the Turkish currency”, adding that monetary policy settings were “too accommodative to address inflation risks.”

Supply chain problems in the agriculture and energy sectors in particular are causing inflationary pressures, Nebati said at an event in the northwestern city of Bursa.

He insisted that Ankara was taking steps to reduce inflation “permanently”, noting that the controversial state-backed program was designed to lure savers back to the lira by promising to protect them from currency risk. The government has also announced several rounds of VAT cuts, as well as a 50% increase in the minimum wage, in an attempt to ease the pain for families.

Analysts have warned that the war in Ukraine could also hit Turkey’s tourism industry, which relies on both Ukrainian and Russian tourists and is an important source of foreign currency for the country’s economy.