Turkey: Change in economic management
According to the decree published in the Official Gazette, with the signature of President Mr. Recep Tayyip Erdoğan, while Mr. Lütfi Elvan, resigning from his duty as the Ministry of Treasury and Finance; Mr. Nureddin Nebati, Deputy Minister since 2018, was brought. Mr. Elvan was appointed to replace Mr. Berat Albayrak., in November 2020, the previous Minister of Treasury and Finance.
If we think from the perspective of the new economy created; It is seen that the focus is on keeping growth high at the point of increasing production and employment. At this stage, if we consider the rate cuts of the Central Bank in recent months, we can say that an approach to keeping interest rates low is desired. We also evaluate that Mr. Erdogan’s desire to create an economy with a permanent current account surplus by exporting is aimed at keeping interest rates low and reviving credit growth in current policies. On the other hand, despite the high inflation, the rate cuts sent the lira to worthless levels and increased the volatility of the financial market.
We consider that the fiscal policy perspective will aim to keep growth high within the framework of the recent trend. On the other hand, it is necessary to complete the missing parts with some structural steps in order to provide an investment-oriented ideal foreign exchange inflow rather than a hot money inflow with high interest rates. It is also necessary to provide the necessary policy clarity in order to minimize the risks to which the economy is exposed through price stability. Although keeping the lira weak may theoretically be beneficial in a controlled manner within a policy, the fact that the volatility factor is too intense causes problems in terms of sustainability, and causes the desired price competition factor to not come forward due to import-related exports and production. At this stage, we assess that the ongoing weakness in the lira may bring further inflation.
According to sources; The Central Bank intervened in the dollar with approximately 1 billion dollars yesterday. There was no change in the direction of the exchange rate movement. We think that the effect of such moves will be temporary. We think that policy and guidance support is necessary for a stable fall in the exchange rate and that inflation should be reduced.
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