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Turkey Will Award Above-Inflation Pay Rise, Board Says

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May 29 (Bloomberg) -- Turkey’s government is required to award workers in state institutions a pay rise of about 8.2 percent for this year, exceeding the forecasted inflation rate, according to a decision by an arbitration board tasked with setting the rate.

The increase will be split into a four percent increase in the first half of the year and four percent in the second half, a statement distributed to reporters today by the board in Ankara said.

The central bank projects inflation of 6.5 percent by the year-end. A previous pay offer of 3.5 percent plus 4 percent for 2012 was “final” and is “already breaching the budget” because it would cost 4.2 billion liras ($2.3 billion), Finance Minister Mehmet Simsek said on May 24.

The pay rise for next year will be three percent in the first six months and three percent in the second six months, the board said. That compares with an inflation goal of 5 percent.

Turkey’s budget performance has deteriorated as an increase in tax revenue slowed along with economic growth, Simsek said in e-mailed comments on May 15. The government will “barely” meet its budget targets for this year should the economy grow by the 4 percent it estimates this year, he said on May 24.

The economy will probably grow 2.5 percent in 2012, according to International Monetary Fund projections.

To contact the reporter on this story: Ali Berat Meric in Ankara at americ@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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