Turkey's Finance Minister signals challenges in economic reforms
Turkey's Finance Minister Mehmet Simsek stressed the importance of patience as he works to address the complex economic challenges facing the nation since he took office in June, in a first foreign media interview published on Financial Times on Wednesday.
FT said that Simsek attributed the recent surge in interest rates to President Tayyip Erdogan's unwavering support for economic reforms. In the interview, Simsek acknowledged that these reforms, aimed at reversing years of misguided policies and rebuilding investor trust in the battered economy, would require time and perseverance.
"We are striving to rebalance the economy and soften domestic demand," Simsek explained, noting that unconventional economic policies had been in place for years under Erdogan's direction.
While expressing confidence that Turkey is on the right track and that there is strong evidence of regained trust, Simsek cautioned, "We need to be patient because challenges persist."
Simsek outlined several key priorities, including efforts to curb inflation, rebuild depleted foreign exchange reserves, and reduce the growing current account deficit. He emphasized the pivotal role of higher exports and investments in sustaining economic growth and underscored the need for Turkey to reduce its dependency on consumer spending, which has been driving inflation.
Furthermore, Simsek revealed plans to gradually ease the currency protection measures (known as KKM) to foster a more flexible exchange rate system.
In terms of inflation control, Simsek highlighted the crucial role of trust, stating that it is paramount to manage inflation expectations effectively.
Discussing international relations, Simsek suggested that establishing more constructive ties with Western countries and Gulf nations could contribute to Turkey's economic revival. He remarked, "Turkey is in the process of emerging from a geopolitical stagnation."
The Financial Times' report also touched upon the views of analysts who believe that Turkey's new Central Bank Governor, Hafize Gaye Erkan, may need to raise interest rates significantly to rein in price pressures, a move that could potentially lead to conflicts with the president and increase the likelihood of her removal as a policy maker.
As Turkey grapples with economic challenges, Mehmet Simsek's call for patience underscores the nation's commitment to implementing necessary reforms to revitalize its economy, with a focus on sustainable growth and stability.