There is strong political commitment to economic program: Şimşek

ANTALYA

Finance Minister Mehmet Şimşek has affirmed the government's robust dedication to its economic program during the Antalya Diplomacy Forum, highlighting significant political investment and a commitment to reducing inflation.

“We are committed to this program. We have invested a lot of political capital in this program.,” Şimşek said in a speech he delivered at the Antalya Diplomacy Forum on April 12.

“Inflation is falling and will continue to fall. We have what it takes to bring inflation down,” he added.

Commenting on how the latest market turbulence is affecting the inflation program, the minister said that expectations may deteriorate in the short run.

“But expectations will ultimately look at realizations. We believe this disinflation will continue,” he explained.

There has been limited lira weakness that is likely to push inflation a little bit up but the pass-through from exchange rate weakness is weak because the domestic demand is not very strong, Şimşek said.

Şimşek added that another compensating factor is the substantial decline in oil prices, which has resulted from U.S. tariffs.

“If oil prices stay low, it is quite likely that the decline in oil prices will compensate the deterioration in inflation expectations and limited lira weakness and the pass-through from that. That’s not how many people think but that is our analysis of how things are likely to be,” he told the audience in a presentation.

“That leave us with a short-term tighter financial condition. We had to tighten financial conditions to deal with recent market turbulence That means the net expected impact is likely to be disinflationary,” Şimşek said.

Şimşek noted that, on the fiscal side, the deficit has been elevated for the past couple of years due to significant earthquake-related spending, but this year, they are aiming for a lower deficit.

Spending discipline will be maintained, while revenue could be negatively affected by tighter financial conditions, the minister noted.

“We are interested in fiscal consolidation, in lower fiscal deficit… because we want it to help the Central Bank bring inflation down,” Şimşek said.