Turkey will not turn back from its new economic model, Treasury and Finance Minister Nureddin Nebati said Friday, stressing that investors in London, with whom he held talks this week, have got to know that.
Nebati said it was unfair to put the burden of the new economic model, which prioritizes production and exports, only on state banks. He said private banks needed to show more effort.
In a series of meetings with investors and executives this week, the minister pledged to keep the Turkish lira stable, bring inflation down to single digits and stem dollarization.
Turkey has achieved a competitive exchange rate with the dollar stable, Nebati said in an interview with private broadcaster Habertürk, adding that his meetings with investors in London were "fantastic."
The government has been endorsing a model based on lower borrowing costs, saying credit, exports and investment will help the country weather inflation. Erdoğan has said the new economic path will also eventually help Turkey solve its chronic current account deficit problem and contribute to stabilizing the lira.
To support the drive, Turkey’s central bank has slashed its interest rates by 500 basis points since September to 14%, before pausing the easing cycle last month.
The Turkish economy’s only problem is inflation, Nebati said, adding that the country had achieved high growth with a low current account deficit and would continue to do so.
"The only problem now is inflation," he noted.
Turkey’s annual inflation soared to a 20-year high of 48.69% in January, according to official data. The government has pledged to act and vowed to safeguard households against soaring prices.
Nebati said the inflation will fall to around 24% by December and hit single digits by May of next year.
He also said financial markets have settled and that the government may introduce an inflation-protected deposit scheme if needed.
The lira has been broadly stable since the start of the year following a 44% decline in 2021. It had hit a record low of 18.4 against the United States dollar in December but rebounded after Erdoğan’s announcement of a scheme to boost lira deposits by protecting them against depreciation.
Nebati said the amount of lira deposits in the scheme to protect them from the effects of depreciation has risen to TL 340 billion ($25 billion).
The initiative had helped the lira rally sharply to just over 10 and then settle at current levels just under 14 to the dollar. The currency was flat at 13.54 against the dollar on Friday.
The government will take further steps to bring Turks’ "under-the-mattress" gold into the financial system, and expected some $25 billion worth of gold to be brought into the economy as a result, Nebati said.
He is due to announce new measures on Saturday to bring "under-the-mattress" gold into the banking system by encouraging households to convert gold holdings into liras.
The "under-the-mattress" term refers to a long-held tradition in Turkey of turning to gold to safeguard wealth and storing it at home.