Vice President Cevdet Yılmaz met with international investors and fund managers in London on Tuesday, sharing views on Türkiye’s 2024 outlook, macro policies and investment climate.
Yılmaz traveled to the United Kingdom on Monday for official talks and meetings with businesspeople and investors. He met with British Deputy Prime Minister Oliver Dowden and Odile Renaud-Basso, the head of the European Bank for Reconstruction and Development (EBRD).
Addressing an event at the London Stock Exchange, Yılmaz said the government’s medium-term economic program (MTP), unveiled last September, “is working as intended,” noting that economic policies would continue to be calibrated by prioritizing disinflation “so that we will achieve permanent price stability.”
Running at nearly 65%, inflation is expected to peak by midyear, and the vice president reiterated the government’s estimates it would enter a steep downward trend as of the second half of the year. The country’s central bank sees year-end inflation at 36%.
The bank has hiked its benchmark policy rate by 3,650 points to 45% since last June after President Recep Tayyip Erdoğan won reelection and initiated a reversal toward more conventional monetary policymaking.
The government raised some taxes and implemented policies to ease soaring domestic demand, one of the main drivers of inflation.
Yılmaz said new policies and the political environment would help Türkiye benefit from the increased capital inflow, especially with the success achieved after the presidential and general elections last May.
“The main objective of the MTP is very clear: to foster a stable growth environment, reduce inflation to single digits in the medium term, and ensure both a domestic and external balance,” he noted.
Disinflationary policies
“While aiming for 4% growth in 2024, we are expecting a notable decrease in annual inflation around mid-2024.”
Data due on Thursday is likely to show Türkiye’s gross domestic product (GDP) expanded up to 4.4% last year, as domestic demand boosted the economy, according to surveys, and it should cool off in 2024 with tighter policies.
The economy grew around 4% in the first two quarters of the year, affected by production disruptions following massive earthquakes that hit the country’s southeast in February and by the central bank’s low-rates policy before May elections, which encouraged consumers to borrow and spend to get ahead of high inflation and Turkish lira depreciation.
It expanded by a more-than-expected 5.9% in the third quarter, driven primarily by solid household spending. The GDP grew an annual 5.5% in 2022 and 3.3% in the last quarter of that year.
Yılmaz told investors that “2025 will see a continuation of these disinflationary policies. We are expecting around 15% (inflation) next year, and the year after that, in 2026, we aim to reach single digits again,” he said, adding that policies have started to show some results.
Pointing to growth forecasts of 3% in 2024, he noted that Türkiye has resolutely implemented policies and measures that support growth.
“Türkiye grew by 4.7% in the first nine months of 2023, and we expect our yearly growth rate to be around 4.4% as we envisioned in our medium-term program,” Yılmaz said. He stressed that over the past 20 years, Türkiye has shown “remarkable economic growth” with an average annual rate of 5.4%.
Yılmaz recalled that exports reached a fresh all-time high of $256 billion in 2023, exceeding the government’s forecast.
“Our services exports reached the level of $100 billion last year, and our targets have been achieved. Tourism revenues especially are quite satisfactory,” he said.
“Despite all demand problems globally and geopolitical developments, we exceeded 57 million tourists last year, and our tourism revenue was around $54 billion.”
The government sees outbound shipments reaching $267 billion and tourism revenues rising to $60 billion this year.
Structural reforms
Yılmaz said they expect a decrease of more than one percentage point in the ratio of the current account deficit to national income, which was around 4.2% last year.
The government aims for 2% in the medium term, according to the official, who also highlighted plans for structural reforms, in addition to monetary and fiscal policies.
“We believe that structural reforms contribute with tangible results in the medium term while creating expectations in the short term. If you succeed in implementing structural reforms, they will create a more confident environment for the future and have short-term effects,” said Yılmaz.
Among others, Yılmaz expressed expectations for the year-end unemployment rate to come in below 10%. The rate ended 2023 at 8.8%, according to official data.
He also highlighted that the budget deficit to national income ratio came in at 5.4% last year, compared to the 6.4% projected in the government’s program.
The central bank’s reserves have reached $134 billion, Yılmaz stated, saying that international capital inflow accelerated with the decrease in the volatility in the exchange rate and improvement in financial conditions.
“Our policies, especially our updated policies, have strengthened the stability of our currency and reduced the volatility in our foreign exchange markets,” he said.
Touching on the green and digital transformation as well as the country’s 2053 target, the vice president noted that “simplification and tightening steps” implemented by the central bank as part of monetary policy will continue and strengthen financial stability and increase the functionality of the market mechanisms in coordination with the country’s fiscal policies.
Quality, diversity of investments
Noting that there are almost 80,000 international companies operating in Türkiye, Yılmaz said that the country has attracted around $260 billion in foreign direct investments (FDI) over the last two decades.
“We take all necessary steps to establish an environment in which the investment climate has improved, predictability for investors will increase and investors’ expectations will be met at a higher level,” he noted.
From 2002 to 2023, Yılmaz said a total of $13.8 billion in foreign or international direct investment was attracted from the U.K. to Türkiye. This is a “clear indication” of the confidence their British counterparts have in the growth and potential of Türkiye’s economy, he added.
He said Türkiye is strategically positioned at the crossroads of the three continents and serves as a central hub for significant trade, energy and other economic activities, adding the country is also listed among the top 10 economies having the largest networks of free trade agreements.
dailysabah.com