In an exclusive interview with the Financial Times, Finance Minister Mehmet Şimşek underscored Türkiye’s promising trajectory while advocating for patience and trust in the country’s economic policy adjustments. Following President Recep Tayyip Erdoğan’s reelection in May, a notable pivot in economic strategy led by respected technocrats has resulted in a series of interest rate hikes, a measure to stabilize inflation, fortify foreign currency reserves, and address the persistent current account deficit.
Şimşek emphasized the significance of recalibrating the economy by bolstering exports and investments, tempering excessive consumer spending, and fostering domestic demand. Despite recent dramatic measures and an evident resurgence in confidence, he cautioned that challenges persist and patience remains imperative.
As inflation continues to be a pivotal concern, projections indicate an upward trend until the end of the year, with an expected peak at 65%. However, the government anticipates a downward trajectory starting in the first half of 2024, marking a transitionary phase in the journey towards stabilization. Şimşek highlighted the central role of trust in redefining inflation expectations and stressed the importance of stringent financial policies alongside targeted interventions such as tighter lending regulations and tax adjustments.
Furthermore, Şimşek outlined plans to gradually phase out a $123 billion savings scheme aimed at safeguarding the Turkish lira against currency devaluation, an initiative that had previously propped up the domestic currency. Notably, recent policy adjustments have yielded positive outcomes, including improved foreign currency reserves, reduced risks in protecting against Turkish debt default, and renewed access to international bond markets for domestic entities.
Şimşek also emphasized the significance of nurturing collaborative relationships with both Western countries and Gulf states to bolster the country’s economic prospects. Türkiye’s recent agreements with the United Arab Emirates amounting to $50 billion in investments and financing serve as a testament to this cooperative vision. Additionally, the Finance Ministry expressed readiness to engage with the European Union on matters such as customs union enhancements, visa liberalization, and joint initiatives related to security, migration, and energy.
