May 09 2018

Turkish deputy PM hopes for swift action from central bank

Turkish Deputy Prime Minister Mehmet Şimşek, who almost resigned over economic policy last month, said he hoped the central bank would take swift action to dispel investor concern about the economy.

Investors are seeing Turkey’s glass as half empty, but the reality is that it’s more than half full because inflation pressures are easing and the trend in the current account deficit is turning positive, Şimşek said in a speech on Wednesday, according to Haberturk television.

Turkey’s currency market has disengaged itself from developments in the real economy, he said.

“I hope that we will put an end to these concerns and this difficult period with swift central bank action and new reforms that will be implemented after the election in particular,” Şimşek said.

Turkish President Recep Tayyip Erdoğan is convening a meeting of the country’s most senior economic officials on Wednesday after the lira slumped to fresh lows against the dollar, raising concern about economic stability. Turkey’s inflation rate rose to 10.9 percent last month, more than three times the average in emerging markets, and the current account deficit has widened to almost 6 percent of gross domestic product, after a succession of economic stimulus measures by the government.

The lira reversed earlier losses on Wednesday after the summit meeting was announced, on speculation that the central bank will increase interest rates to stem the lira’s losses. The currency climbed 1.2 percent to 4.282 per dollar, off a record low of 4.374. It lost 5 percent of its value last week, the biggest decline in major emerging markets.

The Turkish press said last month that Şimşek almost resigned after criticising government policies that prompted companies to take out foreign currency loans, leaving them exposed to losses in the lira. Prime Minister Binali Yildirm reportedly persuaded Şimşek to stay on.

The former Merrill Lynch economist is seen as market-friendly and a stabilising influence on Erdoğan. Some of Erdoğan’s closest  advisers preach alternative policies that are often the opposite of economic norms.