Economy in Turkey: Bitter recipe from Finance Minister Mehmet SİMSEK

Treasury and Finance Minister Mehmet Simsek explained the three main pillars of economic policies as “fiscal discipline, reducing inflation to single digits and structural reforms”. Şimşek’s policy means “cooling the economy”. This means tight monetary policy, reducing the current account deficit and increasing taxes. Economists said, “What Şimşek said is not a surprise. He will use two tools against inflation. Contraction and fiscal discipline. Drastic steps will come after the local elections. The fact that he expressed the ‘Maastricht criteria’ is a signal to foreign investors. There is no equivalent for this in Europe.”

Treasury and Finance Minister Mehmet Simsek took the first steps of austerity policies by explaining the three main pillars of economic policies as fiscal discipline, reducing inflation to single digits and structural reforms. According to economists, the real drastic steps will come after the local elections. The transfer of exchange rate protected deposits (KKM) from the Treasury to the Central Bank was criticized with the words “Where is the financial discipline?”

ECONOMY WILL CONTRACT 

Prof. Dr. Korkut Boratav stated that Şimşek would start the main harsh measures after the local elections and said, “What he said is not a surprise. He will use two tools against inflation. Contraction in the economy and fiscal discipline. I assume that when he took office, he was warned not to take drastic steps until the local elections. This is also evident from the interest rate increases that are below expectations. More drastic steps will come after the election. In the International Monetary Fund (IMF) programs, there is always a demand that salary increases should not be indexed to inflation. Şimşek may also take such a step after the election.”

Meanwhile, Boratav, who also evaluated the transfer of the KKM cost to the Central Bank, said, “How did a Central Bank governor from America accept this decision? There’s a big question mark here. The burden of the budget cannot be transferred to the CBRT.” 

“WINKING AT FOREIGN INVESTORS”

Prof. BOLGUN who evaluated Şimşek’s articulation of the “Maastricht criteria” on the other hand, stated that this was to wink at foreign investors and said:: 

“However, there is no equivalent for this in Europe anymore, these criteria have already been shelved after the crises of 2008 and 2010. As for the inflation target, I don’t believe that the government is fighting inflation anyway. ıt has been constantly hovering in double digits since 2013.

The expression of structural reforms remains a discourse that does not match the actions as KKM which is a burden on the budget is transferred to the Central bank and no detailed program has been announced since May 28.” (Mahfi Eğilmez)

While the discourse of structural reforms is falling down on the KKM Central Bank, which has a budget burden, it remains a discourse that does not match the actions, while a detailed program has not been announced since May 28.” (Mahfi does not Bend)

Economist Mahfi Eğilmez, who evaluated Şimşek’s structural reform and fiscal discipline discourses from his social media account, reminded the KKM decision and shared following: “Paying KKM with money printed by Central Bank instead  of the Treasury, thus showing the budget deficit to be low is not structural reform, it is self-deception.”