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May 21, 2024

Minister Şimşek’s First Year

Turkey’s Minister of Finance and Treasury, Mehmet Simsek, has led the country through a year of wonderful achievements, showcasing his commitment to economic stability and growth. Since assuming office on June 3, 2023, Simsek has focused on implementing conventional economic policies and enhancing transparency, earning the trust of investors and stakeholders alike.

Under Şimşek’s leadership, Turkey has made significant strides in stabilizing its currency reserves and bolstering financial security. One notable achievement was the signing of bilateral agreements with the UAE during President Recep Tayyip Erdoğan’s official visit in July 2023, resulting in agreements and memorandums of understanding worth an estimated $51 billion. These agreements, spanning sectors such as energy, natural resource development, space, and defense, not only diversified economic partnerships but also included crucial financing arrangements such as earthquake relief bonds worth up to $8.5 billion and an export credit facility of $3 billion. These measures played a pivotal role in stabilizing currency reserves and fortifying Turkey’s financial position, highlighting Şimşek’s strategic foresight and diplomatic acumen.

Source: https://think.ing.com/articles/monitoring-turkey-improving-outlook/

Şimşek’s focus on combating inflation has yielded promising outcomes, with aggressive monetary tightening measures initiated since June 2023. The benchmark policy rate soared from 8.5% in Feb 2023 to 45% in Jan 2024 which led to stabilization of growth of inflation. The Projected inflation rates indicate a significant decline to 36% by year-end, further dropping to 14% in 2025 and reaching single digits by 2026. Market reactions have been positive, as Turkey’s credit default swaps plummeted below 300 basis points compared to as high as 700 bps last May, reflecting confidence in Şimşek’s strategies and the overall economic outlook.

During Şimşek’s tenure, Turkey has not only focused on managing inflation but also achieved significant improvements in its trade deficit. Under his leadership, there has been a consistent decline in the annualized foreign trade deficit, marked by monthly decreases. The ongoing decline in Turkey’s current account, which started after reaching its peak last July, has persisted. This is evidenced by a decrease in the 12-month rolling deficit to $37.5bn from $45.4bn in January 2023. Projections suggest further progress, with an anticipated reduction in the current account deficit to $34.7 billion in 2024, strengthening economic stability. Turkey’s strategic pivot towards exports is evident, with January-February exports growing by 8.5% to $41.1 billion, including a record-breaking $21.1 billion in February alone. Currently, Turkey’s major sources of foreign investment are the European Union (contributing 53%) and Middle Eastern countries (18%). To diversify investment, Turkey is actively engaging with oil-rich Gulf nations for participation in its infrastructure megaprojects.

Turkey has turned a corner, and Minister Şimşek has laid the ground for a successful outlook for the years ahead. The proactive measures taken under his guidance, including strategic partnerships, inflation management, and trade deficit reduction, paint a promising picture for Turkey’s economic future. As Delphos, a company keenly observing and supporting these developments, we acknowledge the pivotal role Mehmet Şimşek’s plays in fostering economic resilience and growth, making Turkey an attractive destination for investment and economic cooperation. Under his leadership, Turkey is poised to navigate challenges and capitalize on opportunities, driving sustainable development and prosperity for its citizens and investors alike.

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