Recent volatility won’t have lasting impact on economy: Şimşek

ANKARA

Finance Minister Mehmet Şimşek said on April 7 that he does not expect the recent volatility in the local markets to have a permanent impact on the economy.

Thanks to the economy program they are implementing, they have reduced vulnerabilities and increased the economy's resilience against internal and external shocks, Şimşek said, speaking at an event In Ankara.

The program is on track, he stressed.

The recent 3 to 3.5 percent depreciation of the lira against the dollar may have a limited impact on April inflation, but disinflation will continue, according to Şimşek.

“Overall, inflation has been falling and will continue to fall. Because [reducing inflation] is our priority,” the minister said, recalling that the aim is to bring inflation to single digit permanently in 2027.

Şimşek noted that some attribute the recent increase in Türkiye’s CDS entirely to short-term volatility over the past one or two weeks.

“However, looking at the last three to four days amid the protectionist measures announced by the United States, many countries have experienced a greater rise in their CDS than we have. The movement in CDS indicates that we have performed significantly better compared to our peer countries. The recent turbulence in the economy is not permanent,” Şimşek stressed.

Şimşek stressed that Türkiye is among the countries that benefit the most from the decline in oil prices, and its gross external financing needs are rapidly decreasing.

“There is a balancing in growth, with domestic demand contributing 8 percent. Rapid growth brings both a current account deficit and inflation, which is why one of our key objectives is to make growth more sustainable and balanced,” he explained.

“We expect the current account deficit to increase slightly. If oil prices remain at this level, Türkiye will not face any issues regarding the current account deficit this year,” Şimşek added.

Türkiye’s dependence on exports is lower compared to similar countries, he also said.

“GDP growth in Türkiye is mainly driven by domestic demand, not by exports. This means that the impact of the protectionist measures on the economy will be more limited [for Türkiye] compared to other countries,” Şimşek said.

The budget deficit is declining and the revenue policy is more supportive, with the administered price increase being kept below or close to the inflation target, he also noted.