By Fazli Shahan

Turkish Treasury and Finance Minister Mehmet ?im?ek said that the condition against Turkiye today will gain a supportive character from the second half of 2024. Stating that the current account deficit will decrease and the exchange rate will stabilize thanks to the resource inflow, the Minister said, "This will also positively affect the inflation and expectations."

Answering questions, Treasury and Finance Minister Mehmet ?im?ek gave important messages about financial markets and Turkish economy.

The Minister said that the winds blowing against Turkiye will gain a supportive character as of the second half of 2024. ?im?ek stated that the first tranche of the investments signed with the Gulf countries will enter Turkiye this year. Expressing that they have taken measures to ensure that the budget deficit is in line with the Maastricht Criteria, ?im?ek stated that there is great interest in Turkiye regarding the meeting he held with investors in Istanbul. ?im?ek's explanations are as follows:

Resource Input Increase

Our aim is to bring inflation down permanently after a transition period. As you can see from the forecasts of the Central Bank, inflation will continue to increase in the next few months due to some temporary factors. There are some tax arrangements we have made to improve our budget balances and to heal the wounds of the earthquake. Of course, these tax arrangements are inflationary, but this will not happen again. This is a one-time arrangement. Again this year, there were serious wage increases to compensate for the losses of our citizens and different segments of the society against past inflation. We believe that predictability will increase with the program we will implement. Resource inflows to Turkiye will increase and as uncertainty decreases and current account deficit narrows in the upcoming period, I believe that we will move towards a relative stability in the exchange rate.

We started with countries with more capital

In the last 2 months, we have made an effort to supply the resource that Turkiye needs within the framework of bilateral relations with the Gulf countries. If we look at the context of the Middle East, especially the Gulf countries, they do not only export oil and natural gas as a characteristic of the Gulf countries. They have a surplus of capital that they cannot absorb in their own economy. Therefore, we also need capital imports. That's why we started with countries with surplus capital and established bilateral dialogues with them. Our President has very good relations with him at the highest level. We wanted to turn our President's excellent political relations into an opportunity in terms of trade in the economy and in terms of foreign resources. We wanted that potential to reflect the strengths of bilateral relations to trade.

Some investments will turn into resource flow to start this year

We have very productive dialogues with the Gulf countries, the most concrete sign of this is the 51 billion dollar investment package announced with the UAE. We expect that some of these investments will turn into a resource flow to start this year. These are resources that can be brought to Turkiye quickly, both for long-term financing for the healing of earthquake wounds and for the financing of exports. For example, energy investments, renewable energy investments may take time. This dialogue with the Gulf countries will continue strongly. (Russia-Ukraine war) The pessimistic scenario is low probability, but the expansion of the war to a more regional area, but very low probability. The limited global economic growth also limits the risk appetite.

Since developing countries like ours are considered risky, risk appetite shrinks a little during periods of slowdown in global growth. I believe that starting from the second half of 2024, the headwinds blowing today will become supportive. Because the Fed found the peak in interest rate hikes. Most likely, the market will start talking about interest rate cuts from the second quarter of 2024. The global economy is currently weak. Therefore, a recovery, albeit a small one, has a significant impact on the risk appetite. Meanwhile, local elections will be out of the way. We will be in a period when Turkiye's agenda is revived, where there is still a long-term program ahead of structural reform.

There is great interest in Turkiye

There was great interest in our meeting hosted by JP Morgan in Istanbul. I used to work in this industry for many years. Generally, fund managers from Europe do not attend such events in August. August is mostly a holiday month. It's a month in which things are relatively idling and slowing down. The interest is huge because after a long time, a disinflation program in Turkiye became a program to control inflation permanently and to control the current account deficit. Türkiye is a country with a huge potential that foreigners should always be interested in. I also told the investors in my presentation. At that meeting, “Can you name me how many countries in the world with a population of 85 million and a per capita income of 10 thousand dollars?” I said. They said, "There are 5 countries except Türkiye". USA, China, Russia, Mexico and Japan… You cannot count the 6th country. The 6th country is Türkiye. Therefore, Turkiye is a country with great potential and market size. If we follow rules-based policies in line with world norms, there will be no problem in the flow of resources to Turkiye. There was definitely potential in our talks. They are in a wait-and-see mode, believing that the right steps have been taken. Will these continue? It's in a wait-and-see mode. Stock investors are not like that. There have been net inflows to the stock market for 8 weeks in a row, that is, there is a net inflow of funds from outside. in a wait-and-see mode. Stock investors are not like that. There have been net inflows to the stock market for 8 weeks in a row, that is, there is a net inflow of funds from outside. in a wait-and-see mode. Stock investors are not like that. There have been net inflows to the stock market for 8 weeks in a row, that is, there is a net inflow of funds from outside.

Public companies never came to the fore

Our country experienced a great earthquake disaster. It is important in terms of macroeconomic balances that we meet the financing need arising as a result of this earthquake with external resources and extend it to the long term. With all these countries, the financing of exports is an important topic. In the bilateral negotiations, we gave priority to the issues regarding the financing of the earthquake and exports and attracting investment to our country. Half of the deal tied in the case of the UAE is probably investments in the energy sector. These will reduce Turkiye's current account deficit. The rest are important issues such as earthquake financing and export financing. As our President also stated, we did not even bring up the sale of any public company here.