Government goes to investors to cool economy down
Treasury and Finance Minister Berat Albayrak signaled cuts in public spending to fight inflation and cool the economy down during a meeting with top business representatives in Istanbul on July 24.
In a statement he made after the meeting, Albayrak said he wanted to listen to Turkish investors about their views on fighting inflation, sustainable and healthy growth, budget discipline and spotting Turkey’s potential in the new period, referring to the new presidential government system that was officially introduced after the June 24 elections. Albayrak also said the new Medium Term Plan under preparation would focus on lowering the inflation rate.
His remarks came after the inflation rate hit a 14-year high in June, reaching 15.39 percent. The current account deficit is also widening, reaching $5.9 billion in May from $5.4 billion in the same month last year, with a nearly 9.6 percent year-on-year increase. These have happened as worries escalated that Turkey was in the midst of a heated early election campaign. The depreciation of the Turkish Lira against the U.S. dollar and the euro is affecting the daily lives of people, since Turkey imports oil and gas in hard currency. Five years ago, in July 2013, one U.S. dollar was 1.9 liras. Yesterday, on July 24, it was 4.9 liras right after the Central Bank decided to keep the interest rates unchanged at 17.75 percent, as Treasury bonds give a 16.20 percent yield. It seems there is a fine tuning in the economy policy of the Justice and Development Party (AK Parti) government, since President Recep Tayyip Erdoğan was giving the priority to decrease the interest rates, underlining that the drop in inflation would follow that. Erdoğan said this in a meeting with investors in London last May, after which there were serious fluctuations in the financial markets.
In a recent report, the International Monetary Fund (IMF) warned about “overheating” in the Turkish economy and suggested that measures on the spending side to decrease deficit could help.
After attending a G-20 meeting in Buenos Aires, together with Central Bank Governor Murat Çetinkaya, Albayrak had said he considered “harmony” with the actors in the Turkish economy for success and promised an inclusive dialogue with them while forming the Medium Term Plan. Yesterday’s meeting with a diverse representation from major business actors is implied by the government circles as an indication of that inclusive approach signaled by Albayrak. Serving as the energy minister in the last AK Parti cabinet, Albayrak, also the son-in-law of Erdoğan, was named the treasury and finance minister, with the two ministries having merged in order to reduce the bureaucratic problems slowing the decision-making mechanisms down and to have a single, strong voice in implementing the decisions. The meeting is the first of its kind after many years with hopes to bear fruit if the “inclusive approach” is indeed supported by financial moves by Albayrak.