Turkish Treasury and Finance Minister Mehmet Şimşek (AA Photo)
Türkiye prioritizes macro-financial stability and a tight fiscal policy to cushion the impact of shocks while addressing global structural headwinds, Turkish Treasury and Finance Minister Mehmet Şimşek said.
Şimşek said on Oct. 8 during the Istanbul Economic Forum's opening ceremony that the government maintained a tight fiscal policy to cushion the impact of shocks and prioritize macro-financial stability.
The two-day forum was organized by the Central Bank of the Republic of Türkiye to address global economic policy challenges by gathering central bank governors and high-level policymakers from around the world, including the US and the UK.
Şimşek noted that global structural headwinds included conflicts, trade protectionism, high indebtedness, unfavorable demographics, impending climate disasters and artificial intelligence (AI).
The country plans to increase defense spending by 229% in the 2027 budget against the Central Bank's 21% inflation target for next year to build deterrence.
Şimşek added that the value of research and development in defense projects exceeded $100 billion, with around 1,400 defense products and projects, moving the country toward becoming a top 10 exporter.
He said Türkiye ranked among the top three globally for official development assistance and diplomatic footprint.
Turkish Airlines flew to the most destinations compared with other carriers, he recalled.
He also said the government invested in an $8 billion railway project crossing the Bosphorus in Istanbul to connect Beijing to London.
The country also encouraged its neighbors to invest in additional corridors, such as the new development road, to improve connectivity and resilience.
Şimşek pointed out that the nation invested in natural gas and oil pipelines to ensure the availability of energy supplies.
The nation boosted the share of renewables in electricity generation to almost 60% and set an ambitious 35% electrification target, up from 23%, as the COP31 host.
The government responded to global trade protectionism by expanding free trade agreements, holding 54 pacts, with three pending and ongoing negotiations with Japan, Indonesia, the Gulf Cooperation Council and Canada.
He pointed out that tourism revenue jumped ninefold over the past quarter-century, placing Türkiye among the top five global tourist destinations.
Şimşek mentioned that the country had over 50 internationally accredited healthcare facilities and attracted medical tourists for cosmetic treatments.
He said the nation became the world's third-largest exporter of soap operas and ranked second to London in the gaming ecosystem for startups and unicorns.
The country ranked second to China in the global league of contractors and hoped to aid in regional reconstruction, which required at least $1 trillion over the next decade.
Şimşek noted that the nation hosted the sixth-largest number of international students at its universities.
He underscored that total indebtedness remained at 91%, compared with a 230% average for emerging market peers, while public debt to GDP stood at 22%.
The government targeted a 3.1% deficit this year, keeping it well below the 5.8% average for global emerging markets, and reduced current expenditures from 4.6% of the budget to 2.9%.
The administration sought to strengthen its fiscal position by investing in public procurement, state-owned enterprise governance and tax reforms.
Şimşek said the working-age population would continue to grow over the next decade and the administration planned reforms to boost women's low labor force participation rate.
He said the country invested in 5G+ technology, expanded fiber capacity and planned nuclear power plants, including small modular reactors (SMRs), to power AI.
The government also helped small and medium-sized enterprises boost productivity to capitalize on the positive potential of AI.
The administration invested in irrigation and climate-resilient agriculture to combat global warming.
Şimşek remarked that the country frequently tested its ability to recover quickly from difficulties and adapted its policies despite challenges in a tough neighborhood.
He underscored that delivering price stability remained the primary goal of the medium-term economic program while maintaining fiscal discipline.
The minister added that external imbalances remained manageable even though they deteriorated this year because of the war.
He highlighted that real convergence continued as the economy grew slightly more than 3%, outpacing the 1.5% growth of trading partners, while historical growth over the last 25 years stood closer to 5.5%.
Şimşek noted that the Central Bank governor utilized quantitative and selective credit-tightening tools while the government was adjusting its fiscal policy to make support more selective and targeted.
He concluded that recent stress in the asset management sector remained contained and the country maintained plenty of policy space to respond in a shock-prone world.
Touching on the country's disinflation process, the minister said the process had largely stalled this year because of the war, "but we're not giving up."
"This year deficit would have been actually closer to two and a half percent, had we not deployed fiscal space to cushion or to, to slow the pass through from crudes to final products," he added.
