Treasury and Finance Minister Mehmet Şimşek on Thursday said Türkiye is on the verge of a sharp decline in inflation, predicting that it would slow to mid-teen levels next year and help bring more international investment.
“Inflation might be… low 40s or high 30s later on this year, and next year is mid-teens and then following that single digits,” Şimşek said at an event in London organized by the Chatham House, one of the world’s leading think tanks.
“The market is beginning to believe that the (medium-term economic) program that we put together can enable us to control inflation and bring it down,” he added.
Inflation reached an annual 75% in May, which is said to mark the peak before a series of interest rate hikes and a relatively stable Turkish lira bring relief.
Şimşek’s remarks came as he arrived in London for a series of investor meetings, continuing diplomacy to pitch the country’s yearlong policy pivot that seeks to attract foreign capital.
The minister was to engage with hundreds of investors during sessions organized by JPMorgan, Deutsche Bank and Dome Group.
The meetings that were to extend through Friday follow Şimşek’s visit to the British capital last October.
Türkiye has been seeking to court investors after it started reversing years of loose policy following the general and presidential elections last May.
It has been pursuing efforts to rein in elevated inflation, curb budget and current account deficits and rebuild foreign exchange reserves.
“The (current account) deficit is going to be close to probably 2-2.5% of GDP compared to 6% of GDP last year. And the fiscal deficit is under control,” Şimşek said.
“Rebuilding monetary policy from scratch has taken some time and now we are on the verge of sustained, strong disinflation.”
He said that international investors would start to take a longer-term interest in Türkiye, having already begun to dip their toes back into its shorter-term bond markets.
The Turkish population also needed to stick with the government’s turnaround plans even as it puts the brakes on the economy.
“Patience is needed. Perseverance is needed,” Şimşek said. “There is no real substitute for hard work.”
The sharp decline in the cost of insurance against sovereign default, along with outlook upgrades and positive comments from rating agencies, encourages the government.
Şimşek has repeatedly said Türkiye’s monetary policy is fully functional and the policy mix going forward will be more supportive, but more time is needed to see its effects and convince society at large.
He has insisted that tackling inflation remains the top priority, enhancing competitiveness, boosting productivity and improving the investment climate.
The country’s central bank delivered aggressive monetary tightening to cool growth in price gains, which remains the biggest challenge for authorities.
Since June last year, the central bank has gradually lifted its benchmark policy rate to 50% from 8.5% and has said it would “do whatever it takes” to prevent the inflation outlook from deteriorating.
During the London diplomacy, Şimşek was expected to meet with portfolio investors, major global investment funds and credit rating agencies.
Since assuming office, the minister has actively promoted Türkiye’s economic program and investment opportunities across Europe, the Middle East and the United States.
