Inflation in Türkiye will continue to fall, says finance minister

ISTANBUL

Inflation in Türkiye has been falling for 10 straight months and this will continue, said the Turkish finance minister on Friday, stressing that the country’s will and program to fight inflation are robust and strong.

"We are determined to implement the disinflation program. There is a very strong political will and we have a very strong program," Mehmet Simsek told an International Economic Summit in the Sakarya province, appearing via live link.

Though the world faces serious structural problems, Türkiye has an advantageous position in dealing with them, he said.

"We want to turn our advantages into permanent gains. For this reason, we have been resolutely implementing our macroeconomic stability and reform program since June 2023,” Simsek explained.

“Our aim is to permanently reduce inflation to single digits, create budgetary space for reforms by strengthening fiscal discipline, minimize macro-financial vulnerabilities by reducing the current account deficit, and ultimately realize structural transformation by increasing productivity, competitiveness, and potential growth.”

'Türkiye more resilient to external shocks'

Simsek also touched on the higher tariffs that have rocked world markets, saying: "Due to the protectionist measures that have intensified recently, uncertainty in global economic policies has increased more than ever before. In fact, protectionism is not a new trend. Restrictive measures in trade have risen over the last 15 years. As of last year, trade restrictions had increased 11-fold since before the (2008) global financial crisis. This development is one of the main factors pulling down global growth."

Warning that if the trade wars continue this way, global growth is likely to fall below 3%, he said the main reason for the rising protectionism is the geostrategic competition between the US and China.

Simsek said that in the last 20 years, developed economies such as the US, the EU, and Japan have largely lost their global share in the manufacturing industry to China.

"Türkiye is more resilient in this environment compared to similar countries, for two reasons. First, our dependence on exports is relatively low. Domestic demand is the main driver of our growth. The share of exports of goods in our national income is about 20%. Therefore, the impact on Türkiye may be relatively limited in a world order that is turning inward.

"Second, we do most of our trade with close, friendly close countries. 68% of our exports are to countries we have free trade agreements with. The EU, our largest trading partner, advocates a rules-based, multilateral trading system, as we do. This makes us more resilient to external shocks," he said.

Simsek also noted that there are also indirect effects of this process, but said it is too early to measure them, and the most important of these is how China will respond to high tariffs.