Turkey’s economic programme has Erdogan’s full support, Simsek says

ANKARA, Sept 7 (Reuters) – Finance Minister Mehmet Simsek said on Thursday that Turkey’s economic programme had President Tayyip Erdogan’s full support, a day after the government hiked its forecasts for inflation and cut its economic growth outlook.

Erdogan has for years openly opposed high rates with the unorthodox view that they fuel price pressures. But he said on Wednesday inflation would fall to single digits “with the support of tight monetary policy,” appearing to back recent aggressive interest rate hikes, and surprising some analysts.

Simsek, speaking at a media briefing, also said he planned investor meetings in Germany, financial hubs New York and London, and cities in Asia and the Middle East.

After Erdogan’s policy U-turn began in June with Simsek’s appointment, analysts welcomed what they said was a more realistic effort to tackle inflation that peaked above 85% last year, while cautioning that the short-term economic pain could test his patience.

Simsek, who is highly regarded by foreign investors, emphasised the president’s backing.

“Whether regarding the disinflation programme or fiscal policies, the support of our president is full. We not only feel it, but also see it, it is tangible,” he told journalists.

“…There is not the slightest doubt,” he said, in an apparent nod to scepticism within financial markets over his independence to see through the policy turnaround.

Turkey has faced serious economic strains, with forex reserves depleted and the lira having tumbled in recent years. It has shed a further 25% to the dollar since elections in May.

TIGHTENING MEASURES TO CONTINUE

The new government forecasts show annual inflation rising to 65% by year end before dipping to 33% next year, up from 24.9% and 13.8% respectively in year-earlier forecasts. GDP growth was cut to 4.4% this year and 4% next year, still higher than most economists expect.

Erdogan in June also appointed a new central bank governor, former Wall Street banker Hafize Gaye Erkan.

Since then, the central bank has aggressively hiked rates to 25% from 8.5%. She said at Thursday’s briefing that there was more tightening to come.

“We will continue with monetary tightening measures through all our tools until a significant improvement in inflation is achieved,” Erkan said.

She said appetite for Turkish assets was high and she expected strong investor interest in bonds. Citing reported World Bank plans to double its exposure to Turkey in three years, Erkan said it reflects investor interest in the country’s potential.

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