Economists evaluated: What problems await Şimşek?

Mehmet SimsekHe served as the Minister of Treasury and Finance in the cabinet where AKP President Recep Tayyip Erdoğan was announced.

Bloomberg HTAccording to the news quoted by Şimşek, since the policies that Şimşek followed in his previous periods differed from the heterodox policies implemented in the previous period, the expectation that the model would change at certain levels began to be priced in. Economists evaluated what developments await the economy and the markets after Şimşek took office.

Former IMF Economist and Bilkent University Faculty Member Dr. Burcu Aydın Özüdogru, saying that the markets will want to wait for long-term investments, said, “I think it would be overly optimistic to expect a huge inflow like in the 2000s. There will be a fund inflow; but the most important issue will be whether the policies to be implemented with Mehmet Şimşek will be long-term and whether steps will be taken to underline the message given.”

“TURKEY’S PROBLEMS ARE STRUCTURAL”

Expressing that the focus is on inflation and normalization in monetary policy, Özü Doğru said, “I believe that there are structural processes among the issues that Turkey needs to solve. Among them, the public finance side is the invisible side of the iceberg. Apart from this, there are huge problems such as the legal system, increasing the operability of institutions, re-establishing independence, reshaping the education system to increase the quality of the workforce. He said:

“The construction of reserves will be directly related to the monetary policy to be implemented. The summer period is a period when the import bill is relatively low and the funding is relatively high along with tourism revenues. If expectations are well managed and funds flow from abroad, this will of course present an important opportunity to improve reserves. On the other hand, the hikes in retirees, civil servants and minimum wages in July have the effect of bouncing imports, as they turn into domestic demand again in a high inflation environment. This is a big problem. The second problem is that it is not expected to fix the reserves enough to minimize the risk in these four months until the tourism period is over.”

“TURKEY’S RESERVE SUFFICIENCY RATE WILL CONTINUE TO STAY LOW”

Özüdogru “Turkey’s reserve adequacy ratios will still remain low compared to many international criteria. If the public finance side still continues to be expansionary, this has a very serious import bill. If the reserves are not strengthened enough, if the necessary steps cannot be taken in line with the expectations, if the trust is damaged, the main problem will be in the ability to turn these imports in a period when the import bill increases again after October-November and Turkey’s tourism-based incomes decrease. That’s why I think these are very critical months,” he said.

“There will be no policy of wage increase in favor of the employees”

Kadir Has University Faculty Member Prof. Dr. Erinç Yeldan, on the other hand, said that Şimşek will follow a program that will reduce public expenditures and said, “Unemployment in Turkey has reached the 10 percent band. This rate can be considered as a high rate. After the pandemic, there is an increase in employment exceeding 3 million, which cannot be explained by other indicators of the economy. In terms of economic activity, agriculture is declining. Exports and industry have been declining for two quarters,” he said.

Yeldan said, “In case the interest rates rise, the credits will shrink. This situation will restrain the economy, which is based on domestic consumption, a little. In such a case, an increase in unemployment will be inevitable. However, it is difficult to predict how big this will be. There will also be external factors such as precarious work, seasonality, expansion of the tourism sector after the earthquake. Therefore, it seems difficult to say anything definite in terms of employment. I think that real incomes will decline, but wage increase policies in favor of employees will no longer be followed.”