Türkiye’s economy chief said Sunday that the country will seek to reinforce its economic policies with structural reforms in the coming period, as he reaffirmed the government’s determination to tackle inflation and restore fiscal discipline.
“The monetary and fiscal policies will be bolstered with comprehensive structural reforms in the upcoming period,” Treasury and Finance Minister Mehmet Şimşek told a Horasis Global Meeting in the southeastern Gaziantep province.
Şimşek is the key technocrat in the new economy team President Recep Tayyip Erdoğan named after the May elections. The new administration reversed the yearslong easing cycle and aggressively lifted interest rates to conquer inflation, rebuild foreign currency reserves and curb the chronic current account deficit.
Şimşek repeated that combating high inflation remained a top priority. To achieve this, he stressed the stringent monetary policies, selective credit and quantitative tightening measures implemented to tackle price increases.
Since June, the country’s central bank hiked its key policy rate by a combined 2,150 basis points to rein in inflation, which rose 61.5% over 12 months ending in September.
Restoring fiscal discipline
Şimşek acknowledged that spending related to the devastating earthquakes that struck the country’s southeastern region in February had temporarily disrupted budget balances and stressed the importance of establishing fiscal discipline.
“Earthquake expenditures led to a temporary deterioration in the budget balance. It is important to improve the public financial balance by establishing fiscal discipline,” the minister noted.
Minister Şimşek highlighted the implementation of revenue and expenditure policies to restore fiscal discipline, aiming to bring the budget deficit below the Maastricht Criterion of 3% of the gross domestic product (GDP) by the end of the new medium-term program.
The budget deficit for the first nine months of the year came in at TL 512.6 billion ($18.27 billion), according to official data, marking a 1,027% increase compared to a year ago, mainly due to the impact of the February earthquakes and increased spending ahead of the May elections.
Şimşek pointed out that Türkiye’s low level of indebtedness provided the flexibility to manage significant expenditures such as the earthquakes, which killed more than 50,000 people and left millions homeless.
Since June, authorities have raised taxes to limit budget deficits, cooled domestic demand, rolled back a $123 billion savings scheme that sought to protect Turkish lira deposits from depreciation against foreign currencies and raised foreign exchange reserves to avoid any possible current account deficit crisis.
Rebalancing growth composition
Outlining the outlook of the Turkish economy, Şimşek emphasized the global challenges, including weak growth among Türkiye’s top trading partners, persistently high global interest rates, rising energy prices and a strong dollar.
He cited Türkiye’s centurylong average economic growth rate of 4.8% and a 5.4% average over the last 20 years. However, he also pointed out the need to rebalance the recent economic growth composition.
Despite the rise in tourism revenues, the economy has faced challenges due to strong domestic demand and high gold imports, negatively impacting the current account deficit.
The situation is expected to improve with the anticipated rebalancing and normalization of gold imports, said Şimşek. He also said the country’s potential in natural gas and oil production would help partly meet the nation’s energy needs in the near future.
Surge in investor interest
Furthermore, Şimşek also noted a surge in foreign investor interest, emphasizing the country’s strategic location, large domestic market, youthful and dynamic population, skilled and competitive workforce, liberal investment environment, and well-established logistical infrastructure.
“Significant financing opportunities will be provided from abroad … The potential that Türkiye possesses creates significant opportunities,” he said.
Şimşek is set to continue engaging with investors this week in the Gulf countries to attract foreign capital to bolster the country’s policy overhaul.
Visits to Abu Dhabi, Doha and Riyadh will mark his second tour of these countries since assuming office.
Şimşek also held a series of discussions in key economic hubs like the U.S., U.K., Germany and France and conducted numerous important meetings at the International Monetary Fund (IMF) and World Bank annual gatherings in Morocco two weeks ago.
Looking ahead, the economic administration is planning an East Asia visit before the year concludes.
Source: Daily Sabah
