Speaking in the US, Şimşek gives a date for single-digit inflation

Treasury and Finance Minister Mehmet Şimşek gave a detailed presentation on Turkey's economic outlook at an event held at the Brookings Institution.

Arguing that there is progress in the Turkish economy, Şimşek said, "We project that inflation will fall to single digits by the end of 2026. Inflation is responding to the program we are implementing."

Emphasizing that inflation will record a decline beyond the base effect, Şimşek stated, "The lagged effect of monetary policy has begun to take hold. The negative fiscal impulse and a more supportive income policy will accelerate the disinflation process. Firms' pricing behavior has begun to improve."

Minister Şimşek assessed, "Turkey needs price stability to maintain strong growth; there is no contradiction between growth and inflation."

Speaking about the current account deficit, Minister Şimşek said, "We are making the improvement in the current account balance permanent through the increase in oil and natural gas production, energy transition, and active industrial policies. In this way, we will both contribute to reserve accumulation and reduce the ratio of external debt to national income."

Underlining that the main driver of the increase in reserves is the decrease in dollarization, Şimşek emphasized that the increasing external debt rollover ratios of the banking and real sectors, as well as portfolio inflows, have also contributed to reserve accumulation, and that there has been a decrease of over 100 billion dollars in foreign currency-protected deposit accounts since August 2023.

Şimşek said, "We have a program that envisions increasing productivity. Turkey exhibits a resilient structure against fragmentation in trade. In addition to the Customs Union, we have free trade agreements with 27 countries. Countries with which we have free trade agreements account for 60 percent of our total exports."

HE EXPLAINED WHY ONE SHOULD INVEST IN TURKEY

Touching upon Turkey's advantages regarding investment, Şimşek argued that the country is a large economy with a population approaching 90 million and a per capita income of 15 thousand dollars.

Stating that the country's growth performance is well above its peers among developing economies, Şimşek said, "We are not only a large economy, but we are also growing rapidly."

Emphasizing that the country has a strong and qualified labor market, Şimşek highlighted that more than 1 million qualified workers graduate from universities and vocational schools each year.

Pointing out that there is a strong production culture in the country, Şimşek said, "So, why are we not as rich as some developed economies? Because we have not yet moved up the value-added chain. This is a subject we need to work on. We will accelerate structural reforms to produce medium-high and high value-added products."

Responding to questions after his presentation, Şimşek, regarding the terrorist attack on the Turkish Aerospace Industries (TUSAŞ) campus in Kahramankazan, stated that it was not a "coincidence" that the Ankara attack came immediately after Devlet Bahçeli's statements, adding, "This shows that the PKK is a terrorist organization and that some circles do not want unity and peace."

"TURKEY'S CLOSENESS TO THE EU IS BENEFICIAL FOR BOTH SIDES"

In response to a question regarding Turkey's desire to join BRICS, Şimşek stated that BRICS, in its current format, is a dialogue platform and is not equal to a more structural platform like the European Union (EU).

Stating that Turkey has proven that it is an asset rather than a burden for the EU, Şimşek said, "If they really want deeper integration, they need Turkey, but their own politics are an obstacle to this."

Pointing out that Turkey's closeness to the EU would be beneficial for both sides, Şimşek expressed that this strategic depth and perspective are not seen in European political circles.

When asked how the tariffs that US Republican presidential candidate Donald Trump plans to implement would affect Turkey, Minister Şimşek stated that it would not be appropriate to comment on candidates.

Pointing out that it is projected that the US will have a larger budget deficit due to tax cuts, Şimşek noted that a larger deficit would mean increasing debt. Şimşek stated that this would mean higher long-term interest rates and a strong dollar, adding that this situation would not serve emerging markets and, therefore, Turkey.

Saying that Turkey could also be affected by potential trade fragmentation, Şimşek stated that it is difficult to say whether this would bring Turkey and the EU closer or lead to an update of the Customs Union agreement due to the European political environment.

Emphasizing that updating the Customs Union to include services, public procurement, and agriculture could double trade volume in the long run, Şimşek used the expression, "Everyone could benefit from this, but politics is an obstacle to it."

News Source: AA