Turkey's new policies to bring down inflation, Finance Minister says

The country's annual inflation rose sharply in September to 61.5 per cent

Turkey's Finance Minister Mehmet Simsek says it takes time to regain the market's trust. Bloomberg
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Turkey is introducing “sound policies” to control sky-high inflation and revive the lira, the country's Finance Minister Mehmet Simsek said on Wednesday.

Ankara’s structural reform agenda is aimed at generating confidence in the country’s economy, which would result in higher portfolio and foreign direct investment flows into the country, Mr Sinsek told the Future Investment Initiative summit in Riyadh.

“That would lead to real exchange rate appreciation, which would foster speedier disinflation,” he said during a panel session.

“That's really the game plan, and I think we're on track.”

High inflation remains Turkey’s main risk and policy challenge. Annual inflation rose sharply in September to 61.5 per cent, as strong core inflation pressures were exacerbated by a sharp depreciation in the lira.

Last month, Turkey’s central bank raised the interest rate to 30 per cent, from 25 per cent, to counter rampant inflation and win back market confidence.

The banking regulator expects inflation to hit 58 per cent by the end of 2023, lower than Fitch’s projection of 65 per cent.

“There is conventional monetary tightening, in addition to selective credit tightening, as well as quantitative tightening, so that should help anchor inflation expectations going forward,” Mr Sinsek said.

“It's easy to lose trust, confidence or credibility, but it takes time to regain in terms of policy.”

Turkey continues to deal with the fallout from the earthquake that shook it and Syria in March, with the cost of relief and reconstruction efforts leading to a deeper government deficit.

Up until the February earthquake, Turkey's economy had been performing well. Its economy posted the third highest growth among G20 countries in 2022, rising 5.6 per cent, trailing India and Saudi Arabia.

Updated: October 25, 2023, 7:47 PM