Where will Türkiye’s economy go in 2024? | Economy

IstanbulTurkey faces significant economic challenges as it enters the new year, with the finance minister and finance minister adopting a new economic plan after the 2023 election and announcing a shift to traditional policies and reliance on transparency and predictability in line with international standards. Finance explained. Mohammad Shimshek.

The NEP comes as the country's economy has experienced a deterioration over the past few years, which has been blamed on the unconventional policies adhered to by the president. Recep Tayyip Erdogan On its application.

The new economic government announced the mid-term economic plan from 2024 to 2026. Erdogan announced the details of the plan in front of a large audience in the capital Ankara last September, drawing the country's economic map for the next three years.

Under new economic plan, Türkiye’s economy is expected to achieve growth rate A 4% reduction this year, while the program is expected to reduce Inflation rate It will reach 33% by the end of the year.

The budget deficit is expected to reach about 6.4% of GDP, with the unemployment rate reaching 10.3%. The plan targets Turkey's exports to reach US$267 billion and imports to reach US$372.8 billion by the end of 2024.

Speaking about the new economic plan, Erdogan said he seeks to work with the government to make the economy resilient to various types of shocks through financial discipline and the structural reforms that have been announced, stressing that they have successfully done so in the past This and will continue to do so. Success again, while expressing hope to see positive developments in inflation in the first quarter of 2024.

In its 2024 economic report, the United Nations Conference on Trade and Development (UNCTAD) also predicted that Turkey's inflation rate will decline during 2024 but will remain at double-digit levels until 2025. Turkey's economy is growing at just 2.7% this year, below Ankara's ambitions.

Governor of the Central Bank of Türkiye said Arkan's greatest wrath – When announcing the bank's quarterly inflation report at a news conference in Ankara last November, she said she expected inflation to start declining in the second half of 2024, noting that Turkey's inflation would peak in May and signaling tighter monetary policy. Policy will continue until inflation improves.

She also said that inflation will rise in the first half of this year, especially after the 49% increase in the minimum wage announced in January this year.

Although the Finance Minister said in a tweet on the “X” platform that inflation will start to fall this year and the value of the central bank's foreign exchange reserves will increase, steps will be taken to end the mechanism to protect lira deposits, and improvements will start from reducing the current account deficit and consolidating …fiscal discipline kicks in, as the foundations for high and sustainable growth will be strengthened by 2024.

Experts point out that from a macroeconomic perspective, the budget deficit will be the most important issue in 2024, as the devastating earthquake in February 2023 caused high costs to the country, which many estimate to exceed $100 billion. . local and foreign agencies, as this would place a burden on businesses. Construction and urban renewal projects implemented by the government are included in the general budget.

Monetary Policy 2024

After the 2023 midterm presidential elections, Shimshek took over the Ministry of Finance and appointed a central bank governor, which brought about a fundamental shift in economic policy in general and monetary policy in particular. The central bank began to implement a monetary tightening policy, which led to rising prices and an increase in interest rates from 8.5% to 42.5%. This was in sharp contrast to the policy adopted by the central bank, which pointed out that the problem of inflation can only be solved by lowering interest rates, taking the “interest is “Cause, inflation is effect” policy is contrary to what most economists call and defend.

The measures taken by the central bank – most notably continuing to raise interest rates to unprecedented levels – indicate that strict monetary policy will continue in 2024, through which the central bank seeks to curb inflation and achieve its 5% target in the longer term. interest rate. semester.

‎Turkey_Medium_Term_Economic_Program - Infographic from Correspondent

reduce inflation

Mohammad Abu Alyan, an economic affairs researcher, believes in an interview with Al Jazeera that there will be huge difficulties in reducing inflation given the government's continued pressure on the economic management to achieve the growth rates expected in the medium-term plan. Ratings as requested , as someone seems to be trying to combine two opposite things.

He also pointed out that reducing inflation can only be achieved by giving up the desire to achieve high growth rates, so that economic authorities can reduce the inflation rate to the target rate in the plan, and the government must also abandon the policy of raising interest rates. As last year, efforts will be made to monitor markets and prices and strengthen government regulation, in addition to addressing other factors contributing to inflation.

As for the lira exchange rate, Abu Alyan said that the medium-term expectations of the plan are very ambitious given the huge pressure on foreign exchange in the Turkish market, especially the US dollar, the most prominent of which is the trade balance. In addition to high inflation, deficits and short-term debt have contributed to the lira's continued decline against foreign currencies.

In addition to domestic political pressures, especially local elections next March, and rising geopolitical tensions in the region, this has had a negative impact on the region's currencies, including the lira.

‎Turkey_Medium_Term_Economic_Program - Infographic from Correspondent

Achievements in 2023

Last Tuesday, the Turkish president recalled the most outstanding achievements of the country's economy while participating in an event to publish export data for 2023.

He announced that exports in 2023 set a record in the history of the Republic, achieving US$255 billion and US$809 million, an increase of 0.6% over last year, achieving the expectations of the medium-term economic plan, indicating that the average monthly export revenue has now reached US$21.3 billion, compared with 2002 3 billion US dollars.

Regarding the trade balance and current account deficit, he said that they have started to decline continuously over the past five months, stressing that they will continue to improve in the coming period, in addition to the government's continued efforts to bring inflation down to single digits again. Make concessions on production, jobs and economic growth.

Trade Minister Omar Borat also revealed that Turkey was able to rank second among G20 countries in terms of export growth, after India, which shows that Turkey has overcome the difficult obstacles it has faced at the economic level in the past year. It shows that Turkey has overcome the difficult obstacles faced at the economic level in terms of export growth. Current numbers and statistics may provide motivation to work harder to achieve the 2024 economic targets.

Porat also explained that the strong performance of exports will help achieve economic growth of 5.9% in the third quarter of 2023, thus maintaining the 13th consecutive quarter of continuous growth. He also said that the country aims to increase exports to 267 billion this year.

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