On Sunday, the newly appointed Finance Minister Mehmet Simsek of Turkey said that to ensure predictability in the economy, there is no choice for the country but to return to “rational ground”.
Simsek was named to the cabinet of President Tayyip Erdogan on Saturday to tackle Turkey’s cost-of-living crisis. There were clear indications that the newly elected administration would revert to more conventional economic policies.
The primary goal of the new government is to increase social welfare, said Simsek in a handover ceremony. Simsek said, “Transparency, consistency, predictability and compliance with international norms will be our basic principles in achieving this goal.”
“Turkey has no other choice than to return to a rational ground. A rules-based, predictable Turkish economy will be the key to achieving the desired prosperity.”
He added that in an environment of increasing geopolitical tensions and global challenges, macro-financial stability will be a priority. He said, “Establishing fiscal discipline and ensuring price stability for sustainable high growth will be our main goals.”
The second priority will be keeping the increasing inflation rate in the single digits, said Simsek. He is highly regarded by financial markets, as he served as finance minister and then as deputy prime minister between 2009 and 2018.
He added that “It is vital for our country to reduce inflation to single digits again in the medium term, to increase predictability in all areas, and to speed up the structural transformation which will reduce the current account deficit.”
The annual consumer price inflation of the country stood at 44% in April; it skyrocketed to a 24-year peak and was above 85% last year.
To keep inflation down, structural reforms and fiscal policies will support Turkey’s central bank, Simsek said. Since 2002, it has been the first time that central banks’ net foreign reserves have fallen due to their efforts to stabilize the lira.
The currency lost 90% of its value after a series of crashes in the last decade, and in late 2021, it was at its worst. Following the election run-off on May 28, the lira reported new record lows, which were above 20 dollars.
The lira will fall, and it is expected that it will come down to 28.00 against the dollar in a year, as predicted by Goldman Sachs.
