As per the words of Mehmet Simsek, Turkey’s Minister of Finance, the country returned to a ‘positive phase’ after a period of economic turbulence during March. A palpable market disturbance, entailing a spike in interest rates and a drop in foreign exchange reserves, was consequent of the arrest of Ekrem Imamoglu, the mayor of Istanbul, on the 19th of March.
The central bank of Turkey lowered its key interest rate to 43% this week, dropping 300 basis points, and thus re-initiating a pattern of rate reduction that was disturbed in March. Indicative of this, Turkey’s credit rating was elevated to ‘Ba3’ from ‘B1’ by Moody’s, a credit rating agency, with remarks of better financial policy integrity, diminishing inflation, and lower economic disparities.
As stated by Simsek, the government of Turkey expects to finish the annum in the upper bounds of the central bank’s forecast range, with the predicted statistic under 29%. Since peaking at 75% in May of 2024, the yearly consumer price inflation in Turkey has fallen to 35%. Moreover, the end of year inflation estimate midpoint lies at 24%, between the range of 19%-29%.
The economic development in Turkey has fallen short in past months, with Simsek noting a ‘high likelihood’ of deviating slightly from the budget revenue target. 4.0% GDP growth was projected for the present year according to the government’s three-year policy plan issued last September; yet, the July 18-23 Reuters survey of 34 economists showed a median forecast of 2.8% GDP growth this year, a drop from last year’s 3.2%.
