Minister of Treasury and Finance Mehmet Şimşek, in his speech at an event he attended, said, “It is necessary to think a little bit about where inflation would go if this program did not exist.”
Minister Şimşek said, “We are positioning our country correctly and strongly against these challenges and looking at the events from the window of opportunity. The economic program we are implementing has 3 phases. The first phase was the control and management of risks. In 2023, the biggest disaster in our history, an earthquake, occurred, millions of our citizens were affected by a major earthquake in 13 provinces. Today, there are discourses as if there was nothing at all. Now, while healing the wounds of this earthquake, we are making huge budget deficits and paying off these budget deficits.” “If you monetize it, that is, if you finance it by printing money, you will experience hyperinflation. You should not do this. EYT has been implemented. Around 3 million of our citizens, that is, from the ages of 37-38 to their 40s, will continue to do so. This is the EYT law.” he said.
Minister of Treasury and Finance Mehmet Şimşek stated that Türkiye has an advantage in terms of indebtedness and said, “Since household and real sector debt is low, if we reduce inflation to single digits, growth will multiply. There is a lot of fighting against this inflation, there are approaches to let’s stop somewhere. This is a very myopic approach. Because the formula for permanent, sustainable high growth is, of course, low inflation.” he said.
Stating that the biggest aspect of artificial intelligence is that it will provide a technological service that will increase efficiency, Şimşek said that it will have a great impact on employment markets.
Şimşek emphasized that areas that were considered qualified in the past and would not be affected at all are now facing being pushed into the background very quickly with artificial intelligence, and continued as follows:
“The risk of increasing income and wealth inequality is a serious risk within the country and between countries. Imbalances between regions are a serious risk. Artificial intelligence can increase welfare by increasing efficiency, but the effects outside of it need to be managed. Now, of course, we said autonomous, that is, robots, autonomous systems, instead of sitting and complaining, I say for our industrialists, we are at a very early stage. The global robot market is a market of around 100 billion dollars. It is not a small market, but it is a small market for the global economy. This market will exceed 100 billion dollars by 2050.” “It will turn into a 25 trillion dollar market. Now, our universities and industrialists should not ignore these trends. They should focus on them. Because the added value is here, the profit margins are here, at least in the medium term. Therefore, the windows of opportunity are large for Turkey. Artificial intelligence is expected to have a much more dramatic impact on fields such as law, social sciences and management, but its impact on manual work is seen to be lower.”
“THE FORMULA FOR PERMANENT, SUSTAINABLE HIGH GROWTH IS LOW INFLATION”
Minister Şimşek shared the information that the ratio of world debt to world national income has exceeded 300 percent, and emphasized that this rate is 235 percent in developing countries and 92 percent in Türkiye.
Pointing out that Türkiye has an advantage here, Şimşek said, “Indebtedness is not very high in our country. Neither the households, nor the state, nor the companies, nor the financial sector. Now what does this tell us? It shows that Türkiye has an advantage in terms of indebtedness, which is again one of these global challenges. Since the debt of the household and the real sector is low, if we reduce inflation to single digits, growth will multiply. There is a lot of struggle with this inflation, there are approaches to stop in one place. This is a very myopic approach. Because the formula for permanent, sustainable high growth is Of course it is low inflation.” he said.
Şimşek pointed out that another challenge in the world is the rapidly aging population in the world, and said that the population in Türkiye will also age rapidly.
Referring to the dramatic effects of the rapid aging of the population, Şimşek said, “We will look at the window of opportunity. Health tourism and elderly care services are currently a 4.2 trillion dollar market. It will increase to 8.5 trillion dollars in the medium term. Therefore, there are opportunities everywhere. There are challenges, but there are also opportunities. The important thing is to stop complaining and focus on these opportunities. We are a very good country in tourism, we are at a very good point in health. Let’s combine the two, here is a tremendous opportunity for you. Now we said global warming is a reality. I am not saying this. The water stress level is high in many countries, including Turkey. All of these, of course, require us to make changes and transformations. We have invested 108 billion dollars in irrigation alone. Of course, we need measures in many respects in green technologies. International academics say this. Global clean energy investments will also double. “It will rise to around 4.5 trillion.” he said.
“WE NEED TO TAKE A LITTLE BIT TO ASK THE QUESTION WHERE INFLATION WOULD GO IF THIS PROGRAM HAS NOT EXISTED”
Şimşek stated that the global economy is facing a significant supply shock brought about by the war in the short term and that they are managing this well.
Pointing out that there are great challenges facing the world in the medium-long term, Şimşek said, “We are positioning our country correctly and strongly against these challenges and looking at the events from the window of opportunity. The economic program we are implementing has 3 phases. The first phase was the control and management of risks. In 2023, the biggest disaster in our history, an earthquake, occurred, and millions of our citizens were affected by a major earthquake in 13 provinces. Today, there are discourses as if it had never existed. Now this earthquake “If you run large budget deficits while healing your wounds and monetize these budget deficits, that is, if you finance them by printing money, you will enter into hyperinflation. You should not do this. Around 3 million of our citizens, from the ages of 37-38 to their 40s, retired early, this is the EYT law.” he said.
Şimşek noted that there is a serious foreign trade deficit in Türkiye at the level of 120 billion dollars in 2023, and reminded that there are difficulties in accessing finance and foreign financing.
Emphasizing that the management of these risks is important, Şimşek said, “A very serious effort had to be made to prevent the country from going into a balance of payments stress and to prevent inflation from reaching 3 digits. There are very easy statements, ‘inflation was here and now it is here’, but of course it is necessary to think a little to ask where inflation would go if this program did not exist. Easy ways are always preferred. Now, we spent the first year like this, it is left behind.” he said.
“THE BUDGET DEFICIT DROPPED FROM 5.1 PERCENT TO BELOW 3 PERCENT, BELOW 3 PERCENT IS ALREADY IDEAL”
Minister Şimşek reminded that the goal in the second phase of the program is to reduce imbalances in the economy.
Şimşek said, “Starting to reduce inflation, reducing the budget deficit, reducing the current account deficit, exiting the KKM. The KKM was a very important conditional obligation. We left the second phase behind and made progress in all of the main targets, and got results. Now there is a third phase. The third phase is a phase with a bit of a bright future. Normally, we were waiting for the end of 2027 for this phase to be completed. However, both the shocks experienced last year and this year we are faced with a much more gigantic external shock. These shocks, of course, constitute the third phase. “This is not an excuse, it is a reality. The whole world will now struggle with and manage the effects of this shock.” made his assessment.
Stating that their goal is to consolidate the gains so far, Şimşek said that this can be reinforced with reform.
Şimşek said, “You can get somewhere with politics. Monetary policy is like fiscal policy, but there is only one way to make it permanent, and that is reform, transformation. This requires transformation in the real sector, as well as transformation in the public sector. In general, a reform effort is required. Secondly, of course, this is a period where single-digit inflation, the current account deficit is no longer a problem, budget deficits permanently fall below 3 percent, and productivity and competitiveness are permanently increased. Now, there is no change in our vision for this period, but “Of course, the question of how long this period will last is a function of external developments. There is nothing contrary to what we said here.” he said.
Explaining that inflation reached its peak in October 2022 with 85 percent, closed the year with 64, and then kept the inflation at 65 in 2023, Şimşek said, “Disinflation started in 2024, it is 44 percent. Last year it was 31 percent, and now it is around 31 percent. These latest developments will temporarily affect 1-2 months, but there will be no change in the downward trend of inflation, to reduce inflation and “Continuing the trend is an important gain for Turkey. There are periods when income distribution has worsened in the last 20-25 years. There are periods when it has improved. With disinflation, income distribution has started to improve, but of course we still have a long way to go.” he said.
Şimşek stated that the reconstruction and revival process in the earthquake zone will be largely completed probably by the middle of this year.
Stating that 90 billion dollars were spent as of the end of last year, Şimşek said, “Without making the markets feel this, without causing a significant shock, we transferred these opportunities to the relevant Ministry, transferred them to the relevant units, and these 455 thousand houses were delivered. Now there are 166 thousand in progress. They will be completed within this year. I do not know how many countries in the world have managed to get out of such a big burden so easily. But this is an important gain. We quickly forget. These earthquake wounds “Even though we spent 90 billion dollars, despite the impact of EYT on the system, the budget deficit fell from 5.1 percent to below 3 percent. Below 3 percent is already ideal.” he said.
