Türkiye will use all instruments in the fight against inflation: finance chief

The Turkish government will effectively use all financial instruments at its disposal in its fight against rising consumer prices, the treasury and finance minister said on Friday, stressing that the country will eventually “beat” inflation permanently. .

“Inflation and sky-high prices are not just a problem for Türkiye. It’s everyone’s problem. It is not just a developing world problem, but also a developed world problem,” Treasury and Finance Minister Nureddin Nebati said in his speech at the 2022 Uludağ Economic Summit in the northeastern province of Sakarya.

“In our fight against inflation, we will use all the tools of economic policy in the most effective way, taking into account current conditions. We will defeat inflation in our country permanently together again,” said Nebati.

Countries around the world have been dealing with a surge in food and fuel prices stoked by the COVID-19 pandemic and Russia’s invasion of Ukraine, and Türkiye is known to be particularly vulnerable due to its external energy dependency.

Türkiye’s annual inflation rose 83.45% in September, official data showed on Monday, from 80.2% in August. It marks the highest annual figure seen in July 1998, when it stood at 85.3%.

“We have by no means ruled out the rapid implementation of policies that will protect our citizens against rising inflation and the cost of living,” Nebati said.

The government has introduced several relief measures to help cushion the blow of rising inflation, including raising the minimum wage in December and July, announcing a 25% cap on rent increases, and lowering taxes on utility bills. It has also announced a major housing project for low-income families.

Nebati said that orthodox policies were “being questioned” and added that Türkiye has followed those that prioritize growth taking into account current global conditions.

The government says inflation will fall and the Turkish lira will stabilize under its economic program, called the Türkiye Economy Model, which prioritizes low interest rates to boost output and exports in a bid to run a current account surplus: transactions of Türkiye with the rest of the world.

The Turkish central bank surprised markets by cutting its policy rate by 200 basis points to 12% in the past two months. The bank had embarked on a rate-cutting cycle more than a year ago when it cut its one-week repo rate by 500 basis points to 14%, where it had left it flat in the first seven months of this year.

Known for his opposition to higher interest rates, President Recep Tayyip Erdoğan last week reiterated his stance on high borrowing costs, saying he had advised the central bank to cut its key policy rate further at its upcoming meetings. .

Nebati also said that the world is going through a dilemma with economic policies. “Narrative conflicts will soon be on everyone’s agenda. Will inflation be in focus or growth? What about unemployment?

“The world is experiencing a contraction, we are growing. The world is growing in single digits, while we are growing in double digits. Unemployment is rising globally, we are creating jobs,” said Nebati.

The Turkish economy expanded 7.6% year-over-year better than expected in the second quarter thanks to strong domestic demand and exports. The rate made Türkiye the second fastest growing economy in the G-20.

The country’s GDP had expanded by 7.5% annually in the second quarter. Last year, the economy rebounded strongly from the COVID-19 pandemic, growing 11.4%, its highest rate in a decade.

Nebati said the ruling Justice and Development Party (AK Party) “has been the only direction of stability across the board.”

“The AK Party has managed to reduce high inflation that none of the previous governments could do and managed to reduce high inflation in the first quarter of the 21st century,” he noted.

“AK Party was able to reduce inflation before and it will be us again who will do it again,” Nebati said.

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