Turkey’s newly appointed Finance Minister, Mehmet Şimşek, announced that significant shifts in economic policy are urgently needed to control the country’s spiralling inflation. In his first press conference following his appointment, Şimşek warned on Sunday that Turkey must “return to rational ground” regarding its economic strategies.
“Price stability will be our main target,” stated Şimşek. He underscored the urgency of reining in inflation to single digits over the medium term, describing it as “of vital importance for our country”.
Over the past two years, Turkey has been grappling with soaring consumer prices. In October, inflation hit an official 24-year peak of 85.5 percent. However, independent analysts maintain that the actual figures exceed these official statistics significantly. The escalating cost of basic commodities became a hot-button issue in the recent presidential run-off election.
Following his unprecedented third-term victory, President Recep Tayyip Erdoğan designated Şimşek as Treasury and Finance Minister as part of a comprehensive cabinet reshuffle. The appointment of Şimşek, a former economist at Merrill Lynch who played a key role in Turkey’s recovery from the 2008 global financial crisis, signals a potential shift towards more traditional economic policies.
Erdoğan has been staunchly resistant to increasing interest rates to counteract inflation in the past, deeming such a measure un-Islamic.
“Şimşek will be treading a very fine line,” commented Aura Sabadus, a researcher at the Centre for European Policy Analysis.
“While Şimşek’s appointment is a positive development for the markets, it’s worth remembering that Erdoğan has previously dismissed two deputy central bank governors who opposed his unconventional economic views,” Sabadus added.
However, this clash in economic perspectives could presage further complications, according to Karabekir Akkoyunlu, a lecturer at London’s School of Oriental and African Studies (SOAS).
“Şimşek claims Turkey has no choice but to return to rational economic policies, which prompts the question – why were the previous policies irrational?” Akkoyunlu queried. Akkoyunlu suggested that Erdoğan’s previous policy of generous spending, including measures like providing households with free gas and augmenting public sector salaries, may be succeeded by efforts towards fiscal balancing. “With the election concluded, the ‘campaign economy’ is now a thing of the past. It’s likely Şimşek will pivot towards austerity measures,” he added.
Image Credit: Reuters
