‘They ignore our recommendations’: Turkish finance minister slams private sector

Treasury and Finance Minister Mehmet Simsek argued that the private sector in Türkiye has not “paid attention” to government recommendations aligned with the Medium-Term Program (MTP)—a widely recognized policy framework outlining the government’s macroeconomic targets—stating: “Our projections will emerge more strongly in 2025.”

Simsek addressed participants at the IICEC Conference organized by Sabanci University’s Istanbul International Center for Energy and Climate (IICEC) on Tuesday. Themed “Economic Growth and Energy: Shaping the Economy of the Future,” the conference featured discussions on the Turkish and global economies.

Touching upon topics such as rising protectionism in trade, high global debt and climate change, Simsek informed attendees about the causes and effects of low global economic growth.

‘Structural reforms are crucial’

Simsek emphasized that the disinflation process, managed under the Medium-Term Program, would pave the way for much better financial conditions. He noted that while monetary and fiscal policies have their limits, structural transformation is “indispensable.”

With the disinflation process, we will face much better financial conditions. Structural transformation is indispensable for us because monetary policy and fiscal policy have their limits. They can contribute to a certain extent, but structural transformation is essential for achieving permanent results.

We will not give up on external integration; global developments affect us, but we are still pursuing how to update the Customs Union with the European Union and include services and agriculture in it. Meanwhile, there is progress in free trade agreements with the Gulf Cooperation Council countries.

Mehmet Simsek, Treasury and Finance Minister of Türkiye

He expressed confidence that Türkiye would achieve a more efficient and competitive economy through global integration, structural transformation, and disinflation, emphasizing the decisive implementation of the Medium-Term Program to realize these goals.

Criticizing the private sector, Simsek stated: “Unfortunately, I don’t believe the private sector paid much attention to what we said in 2024, but it will emerge more strongly next year,” and added:

Therefore, Türkiye will achieve a more efficient and competitive economy through global integration, structural transformation, and disinflation. What we need to do is to implement the Medium-Term Program decisively, and what the private sector needs to do is to actually take into account what we have said.

Mehmet Simsek, Treasury and Finance Minister of Türkiye

‘Don’t worry, we hear you, we know the problems’

Acknowledging public concerns over the high cost of living and complaints from industrialists, Simsek assured that the government is aware of the issues and actively addressing them. While noting a temporary economic slowdown in the short term, he expressed confidence in long-term prospects. He emphasized the link between inflation and growth, citing historical data:

“It’s a very simple picture: looking at the period from the 1990s to today, average growth was 2.8% between 1994 and 2003, while inflation stood at 69%. From 2004 to 2013, our growth nearly doubled because inflation dropped to single digits at 8.3%. However, from 2014 to 2023, inflation rose, and growth slowed. Therefore, there is no inherent contradiction between inflation and growth.”

‘Serious inflation issue in Türkiye’

Providing insights into the medium-term program, Simsek highlighted its ultimate goal of achieving sustainable high growth and a fairer income distribution. He noted that the key pillars of the program are price stability, fiscal discipline, a sustainable current account balance, and structural transformation.

Simsek pointed out that the current account deficit has decreased to 0.8% of GDP and is likely to close the year at around 0.7%. He noted that if oil prices remain low and natural gas prices align with buyers’ expectations next year, the improvement in the current account balance will not be temporary.

While acknowledging the influence of gold and energy prices, he emphasized that the medium-term program’s structural transformation could lead to a current account surplus.

Regarding foreign reserves, Simsek stated that Türkiye’s net reserves have reached approximately $50 billion, alleviating concerns. He recalled reserves peaked at $70 billion in 2011 and were around $38 billion at the start of 2018. He assured that with the continuation of sound and rational policies, these reserves would remain stable, adding that Türkiye has met international standards for reserve adequacy as of December.

Simsek addressed inflation expectations, saying:

There is a serious inflation problem in Türkiye, and there is a cost-of-living problem, but the primary goal of this program is to ensure price stability. For this, monetary policy, fiscal policy, structural policies, income policies, and policies on administered and directed prices will all support disinflation in 2025. You may say inflation is high in 2024, and that’s true, but inflation was at 65% at the beginning of the year. If we close the year at 44-45%, that will be a decline of nearly 20 points, and that is not a bad drop.

Mehmet Simsek, Treasury and Finance Minister of Türkiye