Economy enters turbulence

Nureddin Details of the Economic Policy Action Plan presented to President Tayyip Erdoğan by Treasury and Finance Minister Mehmet Şimşek, who replaced Nabati, have emerged. Şimşek said: “Turkey has no choice but to return to a rational footing”, noting a sea change in the economy.

FREE MARKET CONDITIONS

Şimşek’s presentation, published by Borsa Gündem, before he was appointed as a minister under President Tayyip Erdoğan, gives the first signs of a detailed action plan. Minister Şimşek draws attention to the fact that free market rules must be followed in basic economic policies, especially the independence of the Central Bank (BC). Şimşek pointed out that covert public interventions should be phased out to avoid a currency shock in money markets, while noting that Protected Currency Deposits, which have become a growing problem for the management of the economy, can be ended with the strengthening of the foreign currency reserves of the Central Bank. Şimşek, who took over the leadership of economic management, has focused on reducing inflation, the independence and reliability of the Central Bank, and the implementation of strict monetary policy and real interest rates is inevitable.
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THE BELTS WILL BE TIGHTENED

Şimşek, who also put the credit reduction on his card, will press the button to tighten his belt in this context. In order to restore the free market economy, financial controls will be phased out and restrictions on prices, rents and profits will be removed. Incentives and tax exemptions, conciliation, rearrangement of the tax base will also be the steps to return to free market conditions. Among Şimşek’s goals is the end of the home delivery tender period. In this context, the establishment of transparency and competition in public bidding will be considered as part of the return to free market conditions. Şimşek, who put on his to-do list the gradual relaxation of implicit capital controls until the CBT reaches sufficient foreign exchange reserves and exchange rate pressure subsides, plans to prevent speculative FX/TL attacks with this move. A restrictive monetary policy will be followed to reduce the current account deficit, and the tools of this policy will be an increase in interest rates, a slowdown in economic growth and a decrease in imports.

What’s in Simsek’s bag?

■ The policy rate will be increased to reduce inflation.

■ The volume of credit will be tightened, belts will be tightened.

■ In the return to the free market, financial controls will be phased out.

■ No more price controls, rents, and profit limits.

■ Transparency in public tenders will be guaranteed and competition conditions will be established.

■ Covert capital controls will be gradually relaxed.

■ Protected currency deposits will be maintained until the CBT’s foreign reserves reach a sufficient level and the pressure on the exchange rate is relieved.

Sarıgül: Orthodox minister heterodox inflation

While the ‘return of unorthodox policies’, which sent inflation into a high-rise spiral, was discussed, criticism arose after the official inflation announced after the declaration of ‘rational policy’ by the Minister of Finance, Mehmet Şimsek. CHP Erzincan deputy Mustafa Sarıgül, referring to Şimşek on his social media account, said: “The minister is orthodox, the announced inflation is heterodox… We are waiting for Mr. Minister on rational ground.”