By Janet Ekstract
ISTANBUL-After Turkish President Recep Tayyip Erdogan was inaugurated in an official ceremony, his third inauguration on Saturday, he commented: “The Century of Turkiye has begun.” In his inauguration speech at the presidential complex in Ankara, the Turkish president referred to Turkiye’s current constitution as a product of the 1980 coup and said what the country needs is “a libertarian, civil and inclusive one” that will strengthen democracy. Erdogan commented the rise of Turkiye is now a reality as he took his oath at the Grand National Assembly for the presidency for a new five-year term. Part of that rise, included appointing a new finance minister who analysts believe, could bring hope to a Turkish economy in crisis.
A hallmark of the current presidency is Erdogan’s new cabinet that includes the new treasury and finance minister, economist Mehmet Simsek. On Sunday, in a press conference, Simsek said: “Turkiye has no choice but to return to rational ground” when it comes to handling the economy. He said his main focus will be “price stability”- adding that “reducing inflation to single digits in the medium term is of vital importance for our country.” Simsek who worked as an economist for Merrill Lynch, assisted in Turkiye’s recovery from the global financial crisis in 2008. Analysts tout his appointment as an indication that the country could be headed toward a more conventional economic policy. One of the drivers of the devaluation of the Turkish lira has been an insistence by Erdogan to raise interest rates.
It’s because of such a policy that financial experts said Turkiye’s inflation skyrocketed to a 24-year high of close to 90 percent last fall with a number of analysts claiming that actual figures are much higher. The cost of everything from basic goods to agricultural produce began to soar uncontrolled since January 2022 which became a major issue in this year’s presidential election. Experts have commented that Simsek’s appointment is welcome news for markets but they draw a cautionary note with reference to Erdogan’s past firing of two deputy central bank governors who opposed his economic views. Simsek is seen by most as a pragmatic economist with a more sober view toward Turkiye’s economic outlook. Some experts indicate that Simsek will get down to business with a much more austere approach which would mean tightening the reins on Erdogan’s habit of providing freebies to his citizens minus a sound economic plan.
It’s unanimous in international and domestic financial circles that Turkiye needs to move in a different direction where economic policies are concerned. To that end, Simsek has been known for his market-friendly policies and was also Turkiye’s deputy prime minister from 2015-2018. Analysts are hopeful after Simsek’s appointment, that the country will have a fighting chance of regrouping economically. Goldman Sachs analysts view Simsek as an opportunity for more conservative economic policies to take hold. In a report dated June 3, the financial giant stated: “We believe the choice of Mehmet Simsek as the new treasury and finance minister increases the likelihood that monetary policy will shift towards a more orthodox direction.” The country’s current economic policy emphasizes growth and export competition virtually ignoring inflation. The lira has hit its newest low since Erdogan’s reelection with current trade at 21.1023 against the dollar on Monday morning compared to its trade at 18.6935 in January of this year.
