Economy in Turkey: Important statements from Finance Minister Mehmet Şimşek

Treasury and Finance Minister Mehmet Şimşek gave an interview on TRT sharing very important information about the latest situation of the Turkish economy. Mehmet Şimşek, discussed various economic topics, including the state of the Turkish lira and upcoming policy changes. He noted that without the government’s intervention in purchasing foreign currency, the Turkish lira could have dropped below 30 to the dollar. He emphasized the importance of strengthening the country’s foreign reserves and shared much more.

Regarding tax policy, Şimşek announced the transition to a minimum corporate tax aimed at promoting tax fairness, which will apply not only to large multinational corporations but to other firms as well.

On the subject of restrictions on swap transactions, Şimşek mentioned that this issue would be evaluated in the near future, with a likely initial step focusing on long-term priorities.

Key points from Şimşek’s interview include:

1. Success of Economic Program: Şimşek highlighted that the current economic program was effective, leading to a softening in domestic demand, a positive shift in net exports, and a more balanced growth. The external deficit has halved, indicating the resolution of significant imbalances.

2. Increase in Capital Inflows: There has been a substantial increase in capital inflows, exceeding expectations, as confidence in the economic program keeps growing.

3. Balanced and Sustainable Growth: The composition of economic growth is improving, leading to a more sustainable and balanced expansion. Macroeconomic imbalances are gradually being addressed, with significant improvements in inflation expectations compared to the previous year.

4. Structural Reforms and Budget Discipline: The government will accelerate structural reforms and maintain strict budget discipline, aiming to achieve a budget deficit lower than the target. Despite the impact of the earthquake, the budget discipline remains strong.

5. Currency and Inflation Management: The government is committed to reducing inflation to below 30% within the next 12 months, supported by tight monetary, fiscal, and income policies. The goal is to achieve single-digit inflation and sustainable growth.

6. Rent Increase Cap: Regarding the 25% cap on rent increases, Şimşek sees no reason for its continuation and believes market prices should not be intervened with. He anticipates that the cap will not continue.

7. Investor Confidence: There is an increase in global investor interest in the Turkish lira as the economic program shows positive results. Turkey is currently borrowing at rates better than its credit rating suggests, indicating market confidence.

8. Exchange Rate Policy: Şimşek clarified that Turkey did not have a specific exchange rate target, and the Central Bank was focused on accumulating foreign reserves without intervening in the market exchange rate.

9. Grey List Concerns: Turkey is intensifying efforts to combat money laundering and terrorist financing, aiming to be removed from the grey list. Şimşek expressed hope that political considerations would not affect this process.

Overall, Şimşek’s remarks reflect a focus on economic stability, structural reform, and maintaining investor confidence while managing inflation and budget discipline.