High inflation, interest rates hurt businesses: Top business body

ISTANBUL

A number of problems have been hindering businesses to raise their competitiveness and to take new investment decisions in Turkey, including a weaker Turkish Lira, rising inflation rates and high interest rates, the head of the country’s to business association has said.

Hosted by Anadolu Agency’s Finance Desk on Aug. 1, Turkish Industry and Business Association Chair (TÜSİAD) Erol Bilecik also said a smooth landing is needed in the Turkish economy.

There are two big problems before businesspeople, according to him.

“One of them is the weakening trend in the Turkish Lira and another is a rising trend in interest rates,” Bilecik said.

However, high inflation is the top problem for Turkey’s businesses, he noted.

“We have faced a significantly high inflation rate, which should not exist in a big economy like Turkey. The inflation rate hit 15.3 percent. The higher the inflation rate is, the lower the country’s predictability is. Our financial costs have been rising,” Bilecik said, adding that this composition hurt companies’ competitiveness.

Bilecik recalled that one of the first statements by Berat Albayrak after he had become the treasury and finance minister was about the fight against inflation.

“This is a good approach,” he added.

The TÜSİAD chair also noted the inflation rate should be reduced to 5 percent in the medium term.

According to Bilecik, the rising foreign exchange rates have been destroying business.

“The dollar-lira parity at 4.00 was a psychological threshold. Now, the parity has almost hit 5.00. We are seeing these levels high, with which Turkish businesses are not ready to handle,” Bilecik said.

Call for smooth landing in economy

He also noted that the economy faced some overheating last year, urging a smooth landing.

“With the beginning of this year, we have started to see some signals that have shown a cool-down. We have found this positive. Turkey needs to start a smooth landing process in the economy. Of course, an emergency brake will lead to some other hurdles. We need to achieve a healthier and more-balanced economic growth. A good economic plan should be developed to run this process,” Bilecik said, referring to the Treasury and Finance Ministry.

“The announcement of a new economic plan in August, even before September, will create a good vibe in the economy,” he added.

Bilecik also praised Albayrak’s strong emphasis on a closer communication with the business world and his preparation on economic matters.

“During our meeting with the minister, he emphasized he would build a strong communication line with businesspeople. This is very good. He also noted that the new economic program would be announced soon. This is quite good as well. Now, it is time to act,” Bilecik said, adding that three structural reforms must be prioritized by the new economic administration.

These are a comprehensive tax reform, a detailed budget reform and a labor reform, he summarized, while also noting that the independence of key institutions must be maintained as well.