Minister Şimşek: We aim for inflation to fall to single digits!

Treasury and Finance Minister Mehmet Şimşek delivered a presentation on the investment climate in Turkey and the Medium-Term Program (MTP) at the opening of the Turkey-Saudi Arabia Investment and Business Forum. He provided information about the work being carried out in Turkey and touched upon areas where Turkey could assist Saudi Arabia.

"WE CAN ASSIST SAUDI ARABIA"

Şimşek said, "Turkey is currently fourth in the world in terms of the number of tourists it receives. We have vast knowledge, experience, and resources in this field. We can assist Saudi Arabia here. Another area is the construction sector. Turkey is one of the major global players in construction. This is also an area where we can do business together. Construction of some of the world's largest projects has begun in Saudi Arabia, and we want to be a part of this," he said.

In his presentation, Şimşek provided information about the sectors in which Turkey has shown development and indicated that Turkey and Saudi Arabia could also work with third-world countries.

Şimşek stated, "Saudi Arabia aims to localize its defense industry. We are open to projects involving joint design, joint development, joint production, and joint global exports," he said.

2026 TARGET FOR INFLATION...

Touching upon the Turkish economy and the Medium-Term Program in his presentation, and underlining that the Medium-Term Program aims to achieve price stability and single-digit inflation, Şimşek noted the following:

"We believe we have the right program to achieve this. We will have ensured price stability by 2028; the journey has already begun. We are improving fiscal health, repairing the damage caused by the major earthquake, reducing deficits, and more importantly, we will implement structural reforms to make these gains permanent. We will not do anything extraordinary while reducing inflation; conventional monetary policies will be applied, and the tightening of monetary policies will work. Inflation will have fallen significantly in the second half of the year. The path to reducing inflation; we aim for inflation to fall to the mid-30s this year, to around 14 percent next year, and to single digits in 2026. This is a forecast consistent with global experience"

Reminding that the earthquake created a large temporary deficit, Şimşek explained that the effect of this is temporary and that progress in the current account deficit and GDP will continue to be made.

Şimşek stated, "Turkey's indebtedness is relatively low compared to many emerging markets. Even if you combine public, private, and corporate debt, it is less than half of global emerging markets and less than a third of the world average. We expect the current account deficit to fall to less than 2.5 percent of GDP," he said.

Stating that they have a goal to increase Turkey's reserves, Şimşek continued:

"The current account deficit has already started to fall; we think we are on the right track. The current account deficit will fall below 30 billion dollars in the first half of this year. Growth in Turkey is strong. Turkey is one of the world's leading emerging markets in terms of growth. We see a temporary slowdown, but structural reforms are one of the key areas to rebuild this growth and ensure sustainable high growth in the medium term. If you want to build a competitive economy, if you want to create a productive economy, and if you want to improve long-term growth potential, the only way is structural transformation. There is strong evidence that our MTP program is working. We need to know how this program will work; a combination of logical policies and structural transformations, a good narrative... This narrative will help rebuild investor confidence, increase inflows, and ensure the value of money increases. The decline in inflation will accelerate, and imbalances in the economy will be balanced in this way. This is how the program is planned to work, and this program has already started to work and be effective."

"THIS GIVES US COURAGE"

Drawing attention to the decline in Turkey's risk premium, Şimşek provided information about developments in areas such as portfolio inflows and foreign exchange. Şimşek stated, "Since inflation expectations have improved, the market predicts that inflation will fall below 40 percent in the next 12 months, and the market is currently very close to the figures we are targeting, which gives us courage," he expressed.

Pointing out that all the progress made in Turkey is also seen by rating agencies and that they reflect this in their ratings, Şimşek assessed, "Turkey's risk perception is in a much better state than the current ratings. If we look at the spread, it is actually 2 notches above the rating that current rating agencies give Turkey. Markets already think there is less risk in Turkey," he evaluated.

In his presentation, Minister Şimşek also provided information to the participating business people about other advantages Turkey holds regarding investment. Drawing attention to the fact that Turkey has a giant potential in green areas and green products, Şimşek noted that they could work together with Saudi Arabia in this field as well.

In his presentation, Şimşek touched upon investments made in infrastructure and superstructure, targeted works, and Turkey's perspective on artificial intelligence and digitalization, saying, "We are making renewable energy investments. We will invest at least 100 billion dollars over 12 years," he said.