Erdoğan pledges inflation battle, tax breaks in economic programme

Turkish President Recep Tayyip Erdoğan pledged to slow inflation to single digits and introduce tax breaks for small tradesmen and special loans in a package of economic measures on Friday.

The government will set up a price stability board to deal with rising prices and a special monitoring system to help slow food prices, which have climbed sharply in recent months, Erdoğan said in a televised speech in Ankara on Friday.

The main aim of the government’s programme would be to boost economic growth on a sustainable basis, create jobs, increase exports, and reduce the country’s reliance on imports, Erdoğan said.

Turkey will ensure that spending in the budget matches expectations for inflation to help reduce price pressures, Erdoğan said. Inflation in the country has climbed to 15.6 percent, straying from a central bank goal of 9.4 percent for the end of the year and a medium-term target of 5 percent.

The Turkish lira pared some losses during Erdoğan's speech, but was trading down 1.6 percent at 7.58 per dollar at 5 p.m. local time, little changed from earlier in the day. 

Turkey will address asset problems in the banking industry, particularly non-performing loans (NPLs), through restructuring, the formation of venture capital funds and providing incentives for banks to sell the loans to asset management companies, Erdoğan said. Legislation will also be introduced to securitise NPLs and take them off banks’ balance sheets, he said.  

Erdoğan also pledged structural reforms, including making the Turkish Statistical Institute independent. The government will reduce the number of extra-budgetary funds or merge them into the main budget to improve transparency, he said.

The government will abolish income tax for 850,000 small tradesmen to help improve their finances, Erdoğan said. It will also widen the scope of a Credit Guarantee Fund (KGF), he said.

He pledged to help Turkish businesses by providing special two-year loans of 100,000 liras ($13,225) with a six-month grace period on repayment via the KGF. He said the government would also encourage companies to employ more women and young people by providing financial incentives.