Policy correction is largely done, says Şimşek

DOHA

Türkiye has a credible, robust program to bring inflation down, Finance Minister Mehmet Şimşek said, stressing that the monetary policy course correction “is largely done.”

“We had a period where policy choices created some issues, some challenges…That’s largely behind us. We are going through a sustained period of simplification,” said Şimşek speaking at a panel on the margins of the Qatar Economic Forum in Doha on May 15.

The government will tighten fiscal policy to support disinflation, while income policy will be more supportive, the minister said, reiterating that it will do what it takes to bring inflation down as the government’s number one policy is attaining price stability.

“The Central Bank is doing a great job. Now it’s high time that we provide additional support. That’s why this week we unveiled a package of fiscal discipline, fiscal cuts…we will cut certain spending to create more fiscal room,” the minister added.

The monetary policy stance is sufficiently tight enough to anchor inflation expectations, according to Şimşek.

“We have sound policies and a structural transformation narrative…and both combined will hopefully help regain investor confidence, have a big impact on portfolio preferences…And we are almost there,” Şimşek said.

When asked what level of tolerance there would be for hard landing or recession, referring to President Recep Tayyip Erdoğan’s pro-growth policies, Şimşek argued that in the long run there are no tradeoffs between disinflation and growth.

In the short-term, some tradeoffs may emerge, and those tradeoffs are worth living with, the minister noted.

“My sense is that there would be tolerance to some moderation in domestic demand. We are rebalancing growth, we are changing the composition of growth. What we are pursuing is sustainable high growth,” Şimşek said.