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IstanbulTurkey enters the new year with major economic challenges, as it adopted a new economic plan after the 2023 elections, and announced the beginning of the shift to traditional policies and reliance on transparency and predictability in accordance with international standards, as the Minister of Treasury and Finance explained. Mehmet Şimşek.
The adoption of the new economic policy comes after the state of deterioration that the country’s economy has experienced over the past years, which was blamed on the unconventional policies that the President insisted on. Recep Tayyip Erdogan On its application.
The new economic administration revealed the medium-term economic program for the period between 2024 and 2026, the details of which Erdogan announced last September in front of a large audience in the capital, Ankara, drawing the country’s economic map in the next three years.
Based on the new economic program, the Turkish economy is expected to achieve Growth rate by 4% this year, while the program expected a decrease Inflation rate To 33% by the end of the year.
It is also expected that the budget deficit as a percentage of GDP will reach about 6.4%, with the unemployment rate reaching 10.3%. The program aims for Turkish exports to reach $267 billion by the end of 2024, and the value of imports to reach $372.8 billion.
Speaking about the new economic program, Erdogan said that he seeks with his government to make the economy resistant to all types of shocks through financial discipline and the structural reforms that have been announced, stressing that they have succeeded in doing this in the past and will succeed in it again, while he expressed his hope to see positive developments. Regarding inflation in the first quarter of 2024.
The United Nations Conference on Trade and Development (UNCTAD) also expected – in its economic report for the year 2024 – that inflation in Turkey would decline during 2024, but with the rate remaining at double-digit levels until 2025. It also expected that the Turkish economy would achieve growth at a rate of only 2.7% this year. To be less than Ankara’s ambitions.
The Turkish Central Bank Governor indicated Arkan’s utmost wrath – During a press conference in Ankara to announce the bank’s quarterly inflation report, last November – she indicated that she expects the inflation rate to begin to decline in the second half of 2024, pointing out that inflation in Turkey will reach its peak in May, and that the tightening policy The monetary policy will continue until there is an improvement in inflation.
She also indicated that the first half of this year will witness a rise in inflation, especially after the announcement of an increase in the minimum wage by 49% this January.
While the Minister of Treasury and Finance indicated – in a tweet on the “X” platform – that inflation will begin to decline during this year, the value of the foreign reserve at the Central Bank will increase, work will be done to end the mechanism for protecting deposits in the lira, and improvement will begin in reducing the current account deficit and consolidating… Fiscal discipline, as 2024 will see the strengthening of the foundation for high and sustainable growth.
Experts point out that the budget deficit will be the most important issue for 2024 from a macroeconomic perspective, given the high cost that resulted from the devastating earthquake that struck the country in February 2023, which was estimated at more than 100 billion dollars according to many local and foreign institutions, as it will burden business. Construction and urban transformation projects implemented by the government are included in the general budget.
Monetary policy in 2024
After the presidential elections in mid-2023, Şimşek took over the Ministry of Treasury and Finance, in addition to appointing the chief governor of the central bank, which brought about a radical shift in economic policies in general and monetary policy in particular, as the central bank moved to implement a policy of monetary tightening, which resulted in a rise in the price rate. The interest rate increased from 8.5% to 42.5%, in contrast to the policy adopted by the Central Bank, which states that the solution to the inflation problem will only come through reducing interest rates, adopting the policy that “interest is a cause and inflation is a result,” contrary to what the majority of economists call for and defend.
The steps taken by the Central Bank – most notably its continued raising of interest rates to unprecedented levels – indicate the continuation of strict monetary policies in 2024, through which the Central Bank seeks to curb inflation to reach the target rate of 5% in the long term.
Reducing inflation
Economic affairs researcher Muhammad Abu Alyan – in his speech to Al Jazeera Net – believes that in light of the continued government pressure on the economic administration to achieve growth rates as expected in the medium-term program, this will lead to great difficulty in reducing inflation rates as required, as it seems as if there is an attempt To combine two opposite things.
He also points out that reducing inflation will only be achieved by abandoning the desire to achieve a high growth rate, so that the economic administration can reduce the inflation rate to the target rate in the program, and the government must also abandon the policy of raising the minimum wage at very high rates and repeating it. In the same year as last year, in addition to combating other factors causing inflation, working to monitor markets and prices, and tightening government oversight.
As for the exchange rate of the lira, Abu Alyan says that the program’s medium-term expectations are ambitious, in light of the great pressure on foreign exchange, especially the dollar, in the Turkish market, the most prominent of which is the trade balance deficit and short-term debts that come in addition to the high inflation rate, which contributes to The lira’s exchange rate continues to decline against foreign currencies.
In addition to the pressures of the internal political scene, especially regarding the local elections next March, in addition to the escalation of geopolitical tensions in the region, which are leaving a negative impact on the region’s currencies, including the lira.
Achievements in 2023
The Turkish President – while participating in the program to announce export figures for the year 2023, last Tuesday – reviewed the most prominent achievements achieved by his country’s economy.
He announced that exports in 2023 set a record in the history of the Republic by achieving 255 billion and 809 million dollars, with a growth rate of 0.6% compared to last year, achieving the expectations of the medium-term economic program, indicating that the average monthly export revenues have now reached 21.3 billion dollars, after it was 3 billion in 2002.
Regarding the trade balance and current account deficits, he indicated that they had begun to decline sustainably over the past five months, stressing that the improvement would continue in the coming period, in addition to the government’s continued efforts to reduce inflation to single digits again without making concessions in production, employment, and economic growth.
Trade Minister Omer Polat also revealed that his country was able to occupy second place among the G20 countries after India in the level of increasing exports, indicating that Turkey has overcome the difficult obstacles it faced on the economic level during the past year, indicating that the current numbers and statistics may provide motivation. Greater towards achieving economic ambitions for 2024.
Polat also explained that the strong performance of exports contributed to achieving an economic growth rate of 5.9% in the third quarter of 2023, thus maintaining its continuous growth for the 13th consecutive quarter. He also said that his country aims to increase its exports to 267 billion dollars this year.
