ANKARA, July 27 (Reuters) – According to Turkey’s Finance Minister Mehmet Simsek, the country’s economy has re-entered a ‘positive phase’ following financial instability in March. The arrest of Ekrem Imamoglu, Istanbul’s mayor and a key political opponent of President Tayyip Erdogan, on March 19 caused significant market disruption, leading to an emergency increase in interest rates and a reduction in foreign exchange reserves.
This week, Turkey’s central bank reduced its key interest rate by 300 basis points to 43%, restarting a rate-cutting cycle that had been interrupted in March. Moody’s, a credit rating agency, raised Turkey’s credit rating from ‘B1’ to ‘Ba3’, noting improvements in monetary policy credibility, declining inflation, and reduced economic imbalances.
The Turkish government anticipates that inflation will conclude the year within the central bank’s mid to high forecast range, with an expected figure below 29%, according to Simsek. Annual consumer price inflation in Turkey dropped to 35% in June, continuing its decline from a peak of approximately 75% in May 2024. The central bank’s current year-end inflation forecast midpoint is 24%, within a range of 19% to 29%.
Recent months have seen Turkish economic growth lagging behind projections, with a ‘high likelihood’ of a minor deviation from the budget revenue target, Simsek noted. Based on the government’s three-year policy plan released last September, it forecasts 4.0% GDP growth for this year. However, the median forecast from 34 economists surveyed in the July 18-23 Reuters poll predicts GDP growth of 2.8% this year, which is slower than the 3.2% growth recorded in 2024.
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Turkey’s economy returns to a ‘positive cycle’, finance minister says
ANKARA, July 27 (Reuters) – Turkey ‘s economy has returned to a “positive cycle” after market turbulence in March, Finance Minister Mehmet Simsek said on Sunday.
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The detention of Istanbul Mayor Ekrem Imamoglu, President Tayyip Erdogan ‘s main political rival, on March 19 triggered market turmoil that prompted an emergency interest rate hike and drained foreign currency reserves.
Turkey ‘s central bank this week cut its benchmark interest rate by a larger-than-expected 300 basis points to 43%, resuming an easing cycle that had been disrupted in March.
Credit ratings agency Moody ‘s on Friday upgraded Turkey ‘s rating to “Ba3” from “B1,” citing improving monetary policy credibility, easing inflation and reduced economic imbalances.
Turkey ‘s government expects that inflation will end the year “within the central bank ‘s mid-point to high forecast range. We expect a figure below 29%”, Simsek said.
Turkish annual consumer price inflation slowed to 35% in June, extending its fall from a peak of around 75% in May 2024. The central bank ‘s year-end inflation mid-point estimate currently stands at 24%, in a forecast range of 19% to 29%.
Turkish economic growth has remained below forecasts in recent months and there is a “high probability” of a limited deviation from the budget revenue target, Simsek said.
Based on its three-year policy roadmap published last September, the government predicts 4.0% gross domestic product growth this year. According to the median forecast of 34 economists in the July 18-23 Reuters poll, growth in Turkey ‘s GDP is expected to be 2.8% this year, slower than 3.2% in 2024.
Reporting by Huseyin Hayatsever Editing by Peter Graff