As economic growth increases, inflation tends to rise. This happens because the increase in demand that accompanies economic growth, combined with higher imports driven by the need for foreign inputs in production, rising energy prices, currency fluctuations, and other structural issues, leads to inflationary pressures. In the medium to long term, such inflationary trends are unsustainable, making it necessary to implement monetary and fiscal policies aimed at reducing inflation. While the primary
As economic growth increases, inflation tends to rise. This happens because the increase in demand that accompanies economic growth, combined with higher imports driven by the need for foreign inputs in production, rising energy prices, currency fluctuations, and other structural issues, leads to inflationary pressures.
In the medium to long term, such inflationary trends are unsustainable, making it necessary to implement monetary and fiscal policies aimed at reducing inflation. While the primary goal of these policies is to control inflation, they often have the side effect of slowing down economic growth.
Therefore, reducing inflation inevitably requires some degree of economic slowdown.
CHOOSING BETWEEN ECONOMIC GROWTH AND INFLATION
To maintain price stability, low inflation is essential, which often necessitates slowing down economic growth by curbing demand. However, it is also important to maintain the momentum of economic growth when balancing between growth and inflation.
Otherwise, a supply-demand imbalance could cause further price increases, leading to persistent inflation and undermining the effectiveness of anti-inflationary policies. This could waste the sacrifices made by society to lower inflation.
ECONOMIC GROWTH IS AS IMPORTANT AS INFLATION CONTROL
For sustainable economic growth, price stability is crucial. However, for developing countries like Türkiye, moving from middle-income to high-income status, increasing per capita income, ensuring fair distribution of wealth, and reducing unemployment are equally important. Hence, it is vital to balance efforts to reduce inflation with the need to sustain economic growth.
Furthermore, economic growth, and by extension GDP, is a key metric used in comparing all national and international economic indicators.
Therefore, economic growth is as indispensable as controlling inflation.
