Şimşek vows to continue to implement economic program

ANKARA

As eyes are turning to the economy once again with the election cycle now over, Finance Minister Mehmet Şimşek vows that the economic program will continue.

"In order to permanently reduce inflation to single digits, controlling public spending will be prioritized in addition to tight money, selective credit and income policies,” Şimşek wrote on X on April 1.

“We will continue to strengthen and implement our medium-term program with determination… We will transform the economy and increase productivity and competitiveness with the structural reforms to be implemented in line with the timetable announced in the program,” the minister added.

In a speech he delivered on early April 1 at the ruling Justice and Development Party’s (AKP) headquarters in Ankara, after most of the votes were counted, President Recep Tayyip Erdoğan said the government would focus more on addressing economic hardships, the recovery of the regions affected by the earthquakes last year and other urgent matters.

He noted that the medium-economic program and the 12th development plan have been implemented with determination, adding that the government has refrained from populist policies.

“We will start to see the positive results of our economic program, especially regarding inflation, in the second half of the year… Everyone, from the business world to the bureaucracy to tradesmen to farmers, traders and workers, will be able to focus on their own agenda,” Erdoğan told his supporters.

Markets will keep a close eye especially on inflation, which climbed from 64.9 percent in January to 67.1 percent in February.

The Turkish Statistics Institute (TÜİK) will release the inflation data for March on April 4. Economists expect a monthly inflation rate of 3.5 percent for March. Consumer prices rose by 4.53 percent month-on-month in February, easing from 6.7 percent in the previous month.

In the face of the elevated inflation rate, last month, in a surprise move, the Central Bank hiked its policy rate by 500 basis points to 50 percent.

Markets will be closely watching the course of inflation in the coming months and the actions the Central Bank to take to bring inflation under control.

The bank has announced that it raised the discount rate applied to rediscount transactions for bills with a maximum of three months to maturity from a previous 43.25 percent to 50.75 percent. The rate on advance transactions was also raised from 44.25 percent to 51.75 percent.

The bank’s decision was published in the Official Gazette on April 1 and took effect.

The next rate-setting meeting of the bank is scheduled for April 25.

Some analysts argue that the bank may also take further steps to curb credit card spending depending on the fresh inflation data.

Markets will also watch the new budget data and possible steps authorities may take regarding government spending. In the first two months of 2024, the central government budget produced a deficit of 304.5 billion Turkish Liras.

The government is expected to send the bill regarding crypto assets to parliament sometime in April or May, which is important for Türkiye to be removed from the Financial Action Task Force’s (FATF) gray list.