Investors will once more turn their attention to Turkey, according to the Treasury and Finance Minister Mehmet Şimşek. He stated on that debt does not limit Turkey’s growth and that the nation would once more begin to draw in investors after the volatility of the domestic and international markets has subsided.
After Istanbul Mayor Ekrem Imamoğlu was arrested back in March, the Turkish currency and other assets fell sharply. On suspicion of corruption, he was taken into custody in late March. After authorities took action to stabilize markets, assets recovered some of their losses.
President Donald Trump’s attempt to restructure global commerce by enacting tariffs on all imports has rocked financial markets throughout the world, wiping away trillions of dollars in stock market value and undermining investors’ faith in U.S. assets, especially the dollar, as a safe haven.
Citing the aging of the population, the rapid development of artificial intelligence, and the climate problem, Şimşek acknowledged the global environment of increased uncertainty, which is being driven by trade wars and long-standing structural challenges facing the global economy. Global investors are currently cautious and risk-averse, he said, emphasizing that investors view developing nations as relatively risky.
But we think this is a short-term trend for Turkey. “Türkiye stands out as one of the leading countries in this regard,” Şimşek stated in a video message broadcast to the Palandöken Economic Forum in Erzurum, adding that investors will eventually refocus on nations with appealing tales and solid economic foundations.
Tight monetary policy has remained at the heart of Turkey’s programme since the middle of 2023, mostly to combat high inflation, which in March eased to 38.1%. It continued the decline from a peak of almost 75% last May and was the lowest since December 2022.
The Turkish Central Bank began its easing cycle in December but abruptly tightened policy on April 17 in response to recent market volatility. In addition to signaling a renewed commitment to combating inflation, it offered a 350 basis point increase in interest rates to 46%.
According to Şimşek, the medium-term economic policy has assisted Turkey in strengthening its macro-financial stability, lowering its external vulnerabilities, and increasing its shock resistance. He declared, “We are establishing the foundation for high, sustainable growth.” Şimşek emphasized that one of the biggest risks to international commerce is the rise in protectionism. Due in significant part to the growing competition between the United States and China, trade restrictions have increased elevenfold since the global financial crisis of 2008.
But, he noted, Türkiye is comparatively well-positioned to survive the fragmentation of global trade. He emphasized that the economy is largely driven by internal demand rather than exports and that a significant portion of its foreign trade is carried out with friendly and nearby countries. He stated that these are the two key reasons for this.
“Domestic demand is the primary engine of our economy. About 20% of our national GDP comes from the export of commodities. In this case, public spending, private consumer spending, and investments are important factors,” he stated.
“The European Union is one of the 54 nations with which we have free trade agreements. Protectionism and trade fragmentation have no effect on 62% of our overall exports. We are part of a $30 trillion market that spans a large geographic area. In addition, he said, “We have close ties with some countries in the Middle East, Central Asia, and Africa that do not have free trade agreements.
We are more resilient to the fragmentation of international trade thanks to this framework. Additionally, we see this time as a chance to strengthen regional ties. Şimşek also mentioned Turkey’s comparatively low debt load as a significant benefit. Although the overall debt in Turkey is only 93% of GDP, the average for peer emerging nations is approximately 245%.
“Since our debt stock is low, when market fluctuations end, Turkey’s strong foundations will once again attract the attention of investors,” he said, underscoring the fact that there is no debt-related barrier to the company’s expansion. The government hopes to turn benefits into long-term profits through the economic programme.
“We are working to transform the world’s upheaval and difficulties into opportunities for Turkey.” With annual inflation falling for ten months in a row, the disinflation process—our programme’s primary objective—is proceeding smoothly,” he said. “The delayed effect of monetary policy, stronger support from public finances and supply-side reforms will further drive down inflation.” Şimşek added that fiscal restraint and savings would continue.
“This year, we’ll keep up the savings and spending restraints we started last year. Our gross external funding needs are declining, and the external balance has significantly improved. A dramatic reduction in Turkey’s current account deficit, which as of this February is at $12.8 billion, down from nearly $55 billion in May 2023,” he stated.
He pointed out that Turkey is experiencing a current account surplus with moderate growth, excluding gold imports, and emphasized that efforts to implement structural transformation are being accelerated to make this trend sustainable. The reduction of the deficit is also anticipated to be aided by falling oil costs.
Source: Daily Sabah
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