Türkiye is raising the minimum wage by 54.5% as of Jan. 1, 2023, announced President Recep Tayyip Erdoğan on Thursday, in an effort to shield citizens from the negative effects of inflation.

The net minimum wage for single individuals will be TL 8,500 ($455) a month, up from TL 5,500 a month, Erdoğan told a televised address from the capital Ankara. The increase also represents an average annual hike of over 70%, he added.

Turkish households have been struggling with the highest inflation in more than two decades. Annual inflation dropped below 85% last month after touching a 24-year high in October. It is expected to decline sharply in the period ahead as a result of the base effect and falling energy prices globally.

The almost 55% raise is the third hike in the past year. The country enacted a 50% hike at the beginning of 2022, which lifted the minimum wage to TL 4,250. It was then decided to raise the minimum wage in the country again by 30% mid-year in an effort to safeguard households from soaring inflation. Effective as of July 1, 2022, the new minimum wage was set as TL 5,500 per month.

The government will consider another hike to the minimum wage in the event of "unexpected" developments, Erdoğan said. He added that he expects inflation will slow down to as low as 30% in the first half of 2023.

Erdoğan earlier stressed the intensive efforts he said the government was undertaking to eliminate the causes other than cost increases leading to high inflation.

The government has endorsed low interest rates to boost exports, production and investment and create new jobs as part of an economic program with the ultimate aim of lowering inflation by flipping the country’s current account deficit to a surplus.

Türkiye is almost completely dependent on imports to cover its energy needs, which leaves it particularly vulnerable to rising costs that skyrocketed following Russia’s invasion of Ukraine.

Last month, the country’s central bank wrapped up the easing cycle that saw it lowering its benchmark policy rate by 5 percentage points since August to 9% from 14%, in line with Erdoğan’s calls for stimulus. In its meeting on Thursday, the lender also kept the interest rates unchanged.

Erdoğan says high rates cause inflation and he had called for single-digit rates by year-end. He has said the government’s new economic model is expected to yield results in the new year.

The government has introduced several relief measures to help cushion the fallout from inflation, including a cap on rent increases, reduced taxes on utility bills and a major housing project that was recently unveiled for low-income families.

Treasury and Finance Minister Nureddin Nebati also commented on the minimum wage decision, saying he wishes "the new minimum wage to be beneficial to all stakeholders, especially our workers."

Nebati stated that improving the purchasing power and welfare levels of employees during the tenure of the ruling Justice and Development Party (AK Party) governments was one of their priorities, saying: "While we are observing the welfare of more than 85 million citizens in determining the minimum wage that will be valid in 2023," they also ensure that the production will be maintained to maximize the Turkish economy’s potential.

He particularly emphasized that the increase in the minimum wage corresponds to a level above the 2023 year-end inflation rate, which they envisaged as 24.9% within the framework of the medium-term program.

The government sees inflation falling to 65% by the end of the year and 24.9% by the end of 2023.