Türkiye’s new economic chief vows to curb inflation and boost welfare

Türkiye’s newly appointed economic chief said on Sunday that macro-financial stability would be a priority, stressing the „vital importance” of bringing inflation down to single digits, increasing predictability and accelerating structural change.

Mehmet Şimşek was named Treasury and Finance Minister on Saturday, considered the most important appointment in the revamped cabinet announced by President Recep Tayyip Erdogan for his new five-year term.

Şimşek, 56, was highly regarded by investors when he served as finance minister between 2009 and 2015 and as deputy prime minister in charge of the economy until 2018.

His appointment could signal a departure from economic policies centered on low interest rates despite high inflation, analysts said.

Şimşek said Türkiye had no choice but to return to the „land of rationality” to ensure predictability in the economy, and stressed that the primary goal of the new government was to increase social welfare.

„Transparency, consistency, predictability and compliance with international norms will be our basic principles in achieving this goal,” Shimsek said at a handover ceremony alongside his predecessor, Nuredin Nebati, in the capital Ankara.

„Turkey has no choice but to return to a rational state. A rules-based, predictable Turkish economy will be key to achieving the desired prosperity,” he said.

Micro-finance sustainability

Şimşek emphasized that macro-financial stability will be a priority in the context of increasing global challenges and geopolitical tensions.

„We will start our medium-term financial study without wasting time,” he said.

He stressed the importance of reducing inflation to single digits, increasing predictability and accelerating structural change.

„It is imperative for our country to reduce inflation back to single digits in the medium term, increase predictability in all areas, and accelerate structural change to reduce the current account deficit,” Şimşek said.

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„We will carry out our work in coordination with relevant ministries within the framework of these priorities.”

The government’s economic plan from 2021 emphasized monetary stimulus and targeted lending to boost economic growth, exports and investments.

Financial discipline, price stability

Erdogan has repeatedly stressed the government’s commitment to protecting households against higher prices, aiming to bring the inflation rate down to single digits.

Türkiye’s annual inflation hit a 24-year high last year, having moderated significantly in the previous six months.

It last fell to an annualized 43.68% in April, nearly halving from 85.51% in October.

„Establishing fiscal discipline and ensuring price stability for sustained high growth will be our main goals,” Şimşek said.

He noted that fiscal policies and structural reforms would support Turquiev’s central bank to help reduce inflation.

In line with the government’s approach, the Central Bank of the Republic of Türkiye (CBRT) has aggressively lowered interest rates to ease borrowing costs for businesses and individuals and encourage spending.

The policy rate, known as the one-week repo rate, was cut from 19% in mid-2021 to 9% in early 2023.

The monetary authority last cut the benchmark policy rate by another 50 basis points in a bid to spur the aftermath of the devastating February 6 earthquakes that killed more than 50,000 people in the Southeast region and caused widespread destruction in 11 provinces.

Nebadi, for his part, said that in the last five years, he has struggled to overcome the challenges faced due to global and regional developments and to ensure the gradual strengthening of the domestic and domestic manufacturing economy.

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„I fully believe that our minister (Şimşek) will be successful in the new era,” Nebadi said.

New names

Prior to political roles, Shimsek worked as an economist at the US Embassy in Ankara and later at Merrill Lynch. He was known for his pragmatic approach and advocated economic reforms to promote growth, attract foreign investment and ensure fiscal discipline.

Along with Şimşek, Erdoğan appointed Cevdet Yılmaz, a traditional economic manager, as vice president.

Yılmaz previously served as Minister of Development, Deputy Chairman of Economic Affairs of the ruling Justice and Development Party (AK Party), and Deputy Prime Minister in charge of the economy.

Yılmaz, 56, has been the head of the Planning and Budget Commission of the Turkish Parliament since November 2020.

Among others, Erdogan appointed Ömer Bolat as Minister of Trade, Alparslan Bayraktar as Minister of Energy and Natural Resources, Vedat Işıkhan as Minister of Labor and Social Security, and Abdulkadir Uraloğlu as Minister of Transport and Infrastructure.

Mehmet Özhaseki was appointed as Minister of Environment, Urbanization and Climate Change, Mehmet Fatih Kacır as Minister of Industry and Technology, while Mehmet Nuri Ersoy retained his position as Minister of Culture and Tourism.

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