Investors are back, FX reserves recovering, says Şimşek

DOHA

Over the past two weeks, there has been a recovery in FX reserves and investors “are actually back,” Finance Minister Mehmet Şimşek has said.

Interest rates are coming down, CDS — the risk premium — has fallen significantly by close to 90 basis points, he said during a panel about the geoeconomics of growth at the Qatar Economic Forum on May 20.

“If you look at the past few weeks, there has been a recovery in investor sentiment and that’s reflected in the financial market conditions,” Şimşek added.

The 3-year program that they have put in place is on track, is intact and is delivering, Şimşek said.

“We have inflation which is still high but at a 40-month low,” the minister said.

The economic program does not rely on hot money, but FDI has also picked up over the past 12 months, Şimşek also noted.

Türkiye is a very large economy with a pretty decent infrastructure and significant regional integration, he added.

“I think, when the dust is settled, they [investors] will be looking at the countries that are resilient to global trade fragmentation. They will be looking at the countries that will benefit from stability in the region. Türkiye remains the top candidate in terms of FDI inflows with disinflation and predictability improving,” he said.

Responding to a question regarding the impacts of the orthodox monetary policy, Şimşek said that they rebuild the monetary policy and the strong financial position and that all is set for disinflation.

“But no treatment is without any side effects. We are aware of some dislocations in certain sectors. That’s why early this year we extended support to some of the labor-intensive export sectors,” he furthered.

They are looking at specific remedies while keeping the economic program on track, he said.

“The essence of the program is to bring inflation down, so we can set the stage for sustainable high growth. So, a temporary pain is worth taking,” Şimşek stressed.

Households remain in good shape, because household debt to GDP ratio is less than 10 percent, he said, adding that “This is not a leveraged economy.”

“Short term pressures are there, but the key is to sustain the economic program, to deliver disinflation,” Şimşek noted.

Commenting on the terror group PKK’s recent announcement, Şimşek recalled that PKK had waged almost 50 years of war against Türkiye.

“But last week they agreed to disband and disarm. This is huge, because, according to a study, including the opportunity cost, we have wasted almost $1.8 trillion over the past five decades combating terror,” he said.

“So, the peace dividend will be huge in terms of channeling resources to more productive areas for developments, for progress,” the minister said.

While in Qatar, Şimşek is set to hold meetings with the representatives of companies and financial firms to discuss investment and cooperation opportunities.