Matteo Patrone, Vice President of the European Bank for Reconstruction and Development (EBRD), announced that the economic recovery in Turkey is yielding results and that the EBRD aims to make record-breaking investments in Turkey this year as well.
The government and the Central Bank (CBRT) have been trying to reverse years of unconventional policies with tight monetary policy and coordinated fiscal policy since June of last year.
Patrone, who met with government officials including Treasury and Finance Minister Mehmet Şimşek during his visit to Turkey, said he was “very impressed” by the economic program, the coordination of monetary and fiscal policies, and the support given by the business world to these policies.
Having raised the policy rate from 8.5 percent to 50 percent since June last year, the CBRT aims to reduce inflation, which is currently 71.6 percent, to 40 percent by the end of the year.
Expectations for a fall in inflation this year are in line with the targets of the EBRD’s economic team, Patrone told Reuters at the EBRD’s Istanbul office.
“So the direction definitely seems right. And as a result, investors’ confidence in Turkey is returning,” said Patrone, who is also vice president of banking.
When asked about the possibility of President Tayyip Erdoğan changing his mind about current economic policies, Patrone said there was no alternative path.
“I think in the discussions we have had there is cautious optimism that this (economic plan) will be completed. There really is no alternative and we are starting to see the results of the new economic plan,” Patrone said.
Last year, the EBRD invested a record 2.5 billion euros, or $2.71 billion, in Turkey, led by programs launched in response to earthquakes and green energy investments. Since the beginning of this year, the EBRD has invested around 1 billion euros.
Patrone said EBRD investment in Turkey this year would likely reach last year’s record level and focus on municipal infrastructure as part of earthquake-related investments and support for small and medium-sized businesses in the region.
“Our investment review process is comprehensive enough to give us confidence that we will reach last year’s level. We are on the right track,” Patrone said.
The Treasury and Finance Ministry signed a memorandum of understanding with the EBRD in March for €500 million worth of financing for the region affected by last year’s earthquake. The EBRD had pledged to invest up to €1.5 billion in the region over two years.
The economy management states that it aims to attract foreign direct investment and change the structure of economic growth by increasing investment, production and exports, while also continuing its efforts to reduce inflation.
“Investors are starting to trust Turkey again. This applies to portfolio investors and also foreign direct investments,” Patrone said, noting that he observed more direct foreign investor interest in Turkey compared to 12-18 months ago.
“It will probably continue in the future. Let’s see what happens in 2025, but I think foreign direct investor interest will gain momentum towards the end of 2025,” Patrone said.
Patrone said that Turkey’s austerity policies affected public-private partnership projects, but infrastructure projects should continue.
Steps that envisage savings and increased efficiency in many areas, from the use of vehicles and buildings in the public sector to which investments will be prioritized, were announced in May.
“There is a desire to reduce the financial burden, but it is also accepted that infrastructure projects in the country must continue… There will definitely be changes. But I do not expect major changes in the course of events,” Patrone said.
