‘Türkiye to tackle inflation, follow free market rules’

Türkiye will continue taking steps aimed at raising competitiveness and productivity via free market principles, Vice President Cevdet Yılmaz said Thursday after he chaired a meeting of a key economic coordination board.

In his closing remarks, Yılmaz said the government would maintain discipline, use a consistent policy set and would take decisive steps in the fight against inflation.

The main agenda of the meeting was to evaluate the overall economic situation and the budget. The Turkish government acknowledges the importance of thoroughly assessing the country’s economic condition to formulate effective strategies to tackle the existing economic difficulties and drive the nation toward progress.

In what were among the first remarks from the government’s economic team setting out its policies, Yılmaz also announced that the Medium Term Program, revealed in September, will be a pivotal platform for revising public policies and practices. This program will be instrumental in allocating resources and promoting economic growth by effectively utilizing available resources.

Highlighting inflation as a major obstacle, Yılmaz restated the government’s commitment to implementing effective and resolute measures to address this problem. He emphasized their determination to take decisive actions in the battle against inflation, which they perceive as the primary concern, even as they work toward recovering from the damages caused by devastating February earthquakes.

The catastrophic earthquakes that struck Türkiye’s south on Feb. 6 killed over 60,000 people, leveling hundreds of thousands of buildings and causing massive infrastructural damage.

The meeting comes as President Recep Tayyip Erdoğan, who was reelected on May 28 to extend his rule into a third decade, announced his new Cabinet at the weekend and reshuffled his economic team. Erdoğan named Mehmet Şimşek, a former deputy prime minister who foreign investors respect, as treasury and finance minister.

Meanwhile, Hafize Gaye Erkan, a former senior U.S.-based bank executive who was also present at Thursday’s meeting, took over the governorship of the country’s central bank, marking the first woman to govern the bank.

Along with Şimşek and Gaye Erkan, Labor and Social Security Minister Vedat Işıkhan, Energy and Natural Resources Minister Alparslan Bayraktar, Industry and Technology Mehmet Fatih Kacır, Agriculture and Forestry Minister İbrahim Yumaklı, Trade Minister Ömer Bolat, and head of Strategy and Budget of the Presidency Ibrahim Şenel attended the meeting along with the representatives of related institutions and organizations.

Erdoğan earlier on Wednesday said his newly appointed treasury and finance minister would take swift steps in coordination with the central bank, signaling that Türkiye would return to interest rate hikes to combat inflation, revamping policies centered around monetary stimulus.

Erdoğan said he is determined to lower inflation, which dropped to just below 40% in May, to single digits, adding that he maintains his “low inflation, low-interest rate” policy.

A critic of high borrowing costs, Erdoğan had spent the past two years endorsing a “new economic model” that makes ultra-low interest rates a priority.

The model aimed at achieving price stability by slashing borrowing costs, boosting exports and flipping chronic current account deficits to surpluses.

Export, tourism revenues

Yılmaz, meanwhile, emphasized that in the new period, Türkiye will consolidate its financial stability and maintain its human-oriented development with fiscal policy, structural reforms and monetary policy.

“We will resolutely continue to take steps to increase the competitiveness and efficiency of our economy within the free market rules. Growing instability and confidence, increasing employment and sharing the blessings of growth with justice is the main objective, as always,” he said.

Accordingly, Yılmaz noted, “While realizing our investment, employment, production and export targets, we are determined to remove the current account deficit from being an obstacle to sustainable growth.”

“We will continue our technological breakthroughs and increase our export and tourism revenues with high-value-added products and services. We are in a period when the world and our region are facing various challenges as well as opportunities. We will overcome difficulties with stability and confidence, with strong leadership and a consistent set of policies, and evaluate opportunities in line with the interests of our country.”

The current account deficit widened to $5.4 billion in April and is expected to amount to more than $45 billion this year.