The disbandment of the PKK terrorist organization and recent developments in Syria, including the lifting of U.S. sanctions, are going to be "huge" in terms of geopolitics, being "a source of leverage to help Türkiye move up," Treasury and Finance Minister Mehmet Şimşek said on Tuesday.
Şimşek was in Qatar's capital, Doha, speaking during a panel at the Qatar Economic Forum.
During the session, when reminded of U.S. President Donald Trump's announcement that they would lift sanctions on Syria, Şimşek said that "the peace dividend is likely to be massive."
"First of all, having a stable, peaceful and prospering Syria on its own is a huge gain for the region and of course for Türkiye," he said, citing a 911-kilometer (566.07-mile) border with Syria.
"Clearly, that is going to help in a big way, because conflict drags you down, (and) as we address the conflıcts, as we rebuild, you know functions (of) state, it's a huge boost for the entire region," he said.
"So that has been a welcome move," he added.
But going back on the PKK, he said it waged a nearly 50-year war against Türkiye, recalling that last week "they agreed to disband and disarm," adding that "this is also huge."
"Because, according to a study, including the opportunity cost, we have wasted almost $1.8 trillion over the past five decades combating terror," he said.
Now he said, the peace dividend would be huge in terms of channeling resources to more productive areas for development and progress.
"In that sense, these two developments are going to be huge in terms of geopolitics no longer being a drag but actually being a source of leverage to help Türkiye move up," said Şimşek.
Answering a question on attracting long-term interest of investors, the minister touched upon the three-year economic program that the government has put in place, suggesting it is "on track," "is intact" and "is delivering."
Şimşek cautioned against inflation, which he said "is high" but at a 40-month low, noting also "there has been a recovery" over the past two weeks in effect reserves.
Annual inflation slowed to 37.9% in April, the lowest level since December 2021, according to official data.
"Investors are actually back, interest rates are coming down, CDS (the risk premium) has fallen significantly by well over or close to 90 basis points," he explained.
Moreover, he said there has been "a recovery" in the investors' sentiment, if you look at the past couple of weeks, which he said is reflected in financial market conditions.
The Turkish lira depreciated and assets were impacted following the arrest of Istanbul Mayor Ekrem Imamoğlu earlier this year and uncertainty about U.S. tariffs. Imamoğlu was jailed in late March on corruption charges pending trial. That sent the lira and Turkish assets sharply lower before authorities acted to stabilize the markets.
The recovery was particularly seen in the past two weeks as the reserves of the Turkish central bank turned to increase again, while the exit from the FX-protected scheme continued, and the lira remained around 38 against the U.S. dollar.
The minister also said that foreign direct investment (FDI) has also picked up over the past 12 months, adding that Türkiye is a very large economy "with a pretty decent infrastructure and huge pool of talented people and significant regional integration."
"So, I think when the dust settles, they (investors) will be looking at countries that are resilient to global trade fragmentation, they will be looking at countries that will benefit from stability and prosperity in the region. I think Türkiye remains the top candidate in terms of FDI inflows," he said.
Moreover, related to economic policy and potential future moves, Şimşek reiterated that "all is set for disinflation," cautioning, however, that "no treatment is without side effects."
"So, we are aware of some dislocations in certain sectors, and that's why, early this year, we extended support to some of the labor-intensive export sectors, so we are looking at specific remedies while keeping the program on track," he noted.
"But, the essence of the program is to bring inflation down so that we can set the stage for sustainable high growth."
He suggested that "temporary pain" is "worth taking, going through," also adding that they continue to look for short-term fixes to address some side effects.
Answering a question on potential support for households, the minister said that last year, close to a million new jobs were added, addressing, however, that manufacturing is "struggling," but attributing it to the close to recession conditions of the eurozone economy and global growth, which he said is dismal.
"Our main trading partners are not doing that well. So understandably, the manufacturing sector is struggling. That's understandable. But manufacturing accounts for only 23% of our GDP, so the rest of the economy, in particular the services, are doing well, continue to create jobs," he said.
He also said that the households' debt-to-GDP ratio is less than 10%, adding that while short-term pressures are there – the key is to "sustain" the program, deliver on inflation and consequently lay the foundation for strong, sustainable long-term prosperity.
