Erdogan seeks to calm investment and puts Simsek back in Economy

A week after his victory, the re-elected president of Turkey, Recep Tayyp Erdogan, begins to make his first moves to calm things down among frightened investors.

So much so that the economist Memet Simsek is once again recovered to be Turkey’s Minister of Treasury and Finance, who comes in as a replacement for Nureddin Nebati, who had held the portfolio since the end of 2021.

Simsek, 56, is faithful defender of the most orthodox economic policiessomething with which Erdogan rarely agrees, but the president needs to calm investors who expressed their concern after his re-election since in the campaign he assured that he was going to continue with his economic strategy.

Erdogan is known for heavily intervening in monetary policy and dfire those who do not follow their ideological lines. In addition, he is a faithful defender of lowering interest rates to contain inflation, which is not working for him. He cut rates by 550 points from January 2022, which caused a depreciation of the Turkish lira, and the inflation rate in April exceeded 40% according to official sources, 100% according to Enagrup’s team of independent experts.

What is expected of Simsek is that return Turkey to the path of economic orthodoxy that the vast majority of the world’s central banks are applying and move away from Erdogan’s unconventional approach, which has led the country to suffer uncontrolled inflation, sources told Bloomberg who asked not to be identified due to the sensitivity surrounding this matter. In fact, it appears that Erdogan’s aim to calm the waters is paying off, as Turkish stocks rose on the news of the appointment of their new finance minister.

For the time being, Simsek called for autonomy in monetary policy as a precondition for joining Erdogan’s cabinet.

Simsek’s resume backs it up, as he got maintain the growth of Türkiye’s economy during his previous term and, when he left the Government, prices were heartbreaking after two consecutive currency crises until reaching the 80% barrier in 2022.

Added to this, the new minister has a wealth of experience, having previously worked as chief economist and strategist for the Europe, Middle East and Africa region at Merrill Lynch. In fact, during his last term in the cabinet, he frequently traveled to London with the then Governor of the Central Bank, Murat Cetinkaya, to itry to assuage investor concerns about Erdogan’s plan to establish greater control in economic policy, which caused the Turkish currency to plummet.

In any case, there is some skepticism about this decision by Erdogan, given his reputation for dismissing anyone who disagrees with his ideas and policies.

The opinion columnist BloombergBobby Ghosh, assured in an analysis that “most analysts agree that any chance of healing the wounds has been lost with his re-election.”

The columnist assures that this decision to reinstate the former finance minister “will mark the triumph of hope over experience.” But he stresses that investors “they shouldn’t make the same mistake” and that they should not put too much emphasis “on the president’s vague promise to name a team with international credibility.”

Ghosh recalls that when he was not appointed deputy prime minister to “calm investors”, his roles “were poorly defined” and the economy was in the hands “of those who followed Erdogan’s peculiar precepts on monetary and fiscal policy.” Specifically, he talks about the idea of lower interest rates to contain the rate of inflation.