Economic program will be strengthened, says finance minister

BURSA

The medium-term economic program is working and yielding the desired results, Finance Minister Mehmet Şimşek has said, vowing to further strengthen the program. 

“We are determined to resolve Türkiye’s macroeconomic problems,” Şimşek said in a speech he delivered at the Uludağ Economy Summit.

He said that the government’s priority is price stability and fiscal discipline, which supports price stability, adding that more decisive steps will be taken to reduce inflation.

Disinflation will be established in the second half of 2024, according to the minister.

The annual inflation rate accelerated from 67.07 percent in February to 68.5 percent in March, while the monthly inflation eased from 4.5 percent to 3.2 percent, the Turkish Statistical Institute (TÜİK) reported earlier in April.

Additional steps will be taken to support the disinflation process and those measures will be mostly related to monetary policy and structural reforms, Şimşek said.

“We will reduce inflation with tight monetary and fiscal policy, revenues policies compatible with the targets, structural transformation and productivity increase,” the minister said, adding that they will focus more on expenditures this year.

Work aimed at boosting public savings is about to be completed and some of its details could be announced, Şimşek noted.

The measures regarding public savings will start to be implemented in the second half of this year, according to the minister.

Starting from next year, the budget deficit will never exceed 3 percent of GDP, Şimşek said.

Tight monetary and fiscal policies will also help reduce the current account deficit, he noted, adding that a fiscal space will be created to weather shocks and for reforms in the upcoming period.

In the medium-term program forecasts that the current account deficit will be 3.1 percent of GDP this year, but more likely that the deficit will be less than 2.5 percent, according to the minister.

“The budget deficit target is 6.4 percent of GDP, but we are aiming for a deficit of below 5 percent," he said.

Şimşek also stressed that the economy’s growth performance will remain strong.

“Türkiye has performed better than other emerging countries since August. Türkiye’s risk premium is falling faster than that of developing countries, while exchange rate volatility has decreased,” he said.

While domestic demand will soften as of the second half of the year, net exports’ contribution to growth will turn positive with the recovery in foreign demand, according to the minister.

“We will experience a smooth transition in growth, but it will remain at a reasonable,” Şimşek said.