After winning the recent elections in Turkey, President Recep Tayyip Erdogan states that his new economic team's primary focus is to reduce the country's inflation rate, which currently lingers around 40%, to single digits. Erdogan shared his plans during a meeting with Turkish exporters on Saturday, saying, "Now that the elections are over, our hand is stronger. We will cut inflation to single digits; that will be the priority of the new economy team."
Despite two devastating earthquakes in February, Erdogan remains confident about the Turkish economy's strong recovery. However, many foreign investors have already withdrawn their stocks and bonds because of his fixation with ultra-low interest rates. Low rates have accelerated inflation, and the central bank has depleted most of its reserves to stabilize the lira, causing it to suffer more than a 20% drop against the dollar this year.
Investors are now looking to see if the new Treasury and Finance Minister, Mehmet Simsek, and central bank Governor, Hafize Gaye Erkan, can put an end to Erdogan's unorthodox economic policies, including his back-door efforts to bolster the lira, and keeping interest rates well below inflation levels.
The central bank is scheduled to hold its interest rate setting meeting on June 22, and investors are eagerly waiting to see if the new economic team will put in place measures that can help reduce inflation while also supporting foreign investment growth. It remains to be seen, however, whether this new exercise will result in the desired outcome or not.