Erdogan hints at economic policy shift with Simsek’s return

By Al Mayadeen English
Source: Bloomberg
6 Apr 2023 17:49

As the Turkish elections near, Erdogan discusses new economic reforms.

Turkey's President Recep Tayyip Erdogan speaks to the media after a summit of the Organization of Turkic States, in Ankara, Turkey, Thursday, March 16, 2023. (AP)

Turkish President Recep Tayyip Erdogan announced that former Finance Minister Mehmet Simsek could trigger an economic shift after next month's elections if the ruling party remains in power.

During an interview for 24 TV on Wednesday, Turkish President Recep Tayyip Erdogan said, “We’re preparing to further strengthen our economic policies in the period ahead,” adding that "a team under the coordination of Mehmet Simsek, who participated in the economy’s management for years, is making preparations to that end.”

The President announced that the Treasury Finance Ministry and Central Bank are making preparations, "God willing, after elections, we will bring all of them together and continue our path by fortifying our economic policy."

Simsek, a former Merrill Lynch analyst, was one of Erdogan's last pro-investor officials who stood up for traditional policies. Erdogan's struggle with a cost-of-living crisis, which is endangering his popularity in the lead-up to the May 14 election, is what prompted the hint at his possible return.

The two met last month in Ankara, stoking speculation that Simsek could take a role in government, but he said he wanted to stay out of active politics.

Economic policy

Simsek was succeeded by Erdogan's son-in-law after leaving office in 2018, and the President exerted heavier influence over the economy's administration. He championed policies that prioritized growth over price stability, prompting an exodus of foreign investors.

As the Central Bank launched an easing cycle, inflation soared to a 2-year high last year, guided by Erdogan's wish for low borrowing costs. The Central Bank's foreign exchange reserves were also depleted as policymakers try to stabilize the lira.

Turkey is facing its worst currency crisis since August 2018 when the value of the lira hit historic lows following diplomatic disputes with then #US President Donald #Trump, what is happening to the #TurkishLira?#Erdogan #Turkey pic.twitter.com/rAvTbZyEcu
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Incumbent Finance Minister Nureddin Nebati on Monday ruled out a return to orthodox politics after elections, saying in a televised interview, “We say that interest rates will not increase on May 15. There will be no change in our economic policy.”

According to a Bloomberg survey, Wall Street banks like JPMorgan Chase&Co and Goldman Sachs Group Inc expect a sharp reversal in monetary policy after elections, expecting that the benchmark interest rate could spike to at least 30% from 8.5%, according to Bloomberg.