Treasury and Finance Minister Mehmet Şimşek said on Sunday that Türkiye’s growth is not constrained by debt and the country would again start attracting investors once the domestic and global market volatilities subside.
Turkish lira and other assets plunged last month following the detention of Istanbul Mayor Ekrem Imamoğlu. He was arrested in late March on corruption charges. Assets recouped some losses after authorities acted to stabilize markets.
Globally, President Donald Trump's push to redesign world trade by imposing tariffs on all imports has sent shockwaves through financial markets, wiping out trillions of dollars in stock market value, and has shaken investors' confidence in U.S. assets as a safe haven, including the dollar.
Şimşek acknowledged the global environment of heightened uncertainty, fueled by trade wars and deep-seated structural challenges facing the world economy, citing an aging population, the rapid advancement of artificial intelligence and the climate crisis.
He said global investors are currently cautious and risk-averse, highlighting that developing countries are perceived as relatively risky by investors.
"However, we believe this is a temporary trend for Türkiye. Over time, investors will refocus on countries with strong macroeconomic foundations and compelling narratives," Şimşek said in a video message sent to the Palandöken Economic Forum in Erzurum.
"Türkiye stands out as one of the leading countries in this regard."
Since mid-2023, Türkiye has been implementing a program that has centered around tight monetary policy, mainly aimed at curbing stubborn inflation, which slowed to 38.1% in March. It marked the lowest since December 2022 and extended the fall from a peak of around 75% last May.
Türkiye’s central bank kickstarted its easing cycle in December but reversed it on April 17 with a surprise policy tightening amid recent market volatilities. It delivered a 350-basis-point interest rate hike to 46% and signaled renewed commitment to tackling inflation.
The medium-term economic program has helped Türkiye reduce external vulnerabilities, strengthen its resilience to shocks and reinforce its macro-financial stability, Şimşek said.
“We are laying the groundwork for sustainable, high growth,” he said.
Şimşek stressed that rising protectionism poses one of the greatest threats to global trade. Since the 2008 global financial crisis, trade restrictions have multiplied eleven-fold, driven largely by the escalating rivalry between the United States and China.
Türkiye, however, is relatively well-positioned to withstand global trade fragmentation, he said.
This is due to two main reasons, he said, stressing that the economy is primarily driven by domestic demand rather than exports, and a large share of its foreign trade is conducted with friendly and nearby countries.
“The main driver of our economy is domestic demand. The share of goods exports in our national income is approximately 20%. Here, investments, private consumption expenditures and public spending are key determinants,” he said.
“We have free trade agreements with 54 countries, including the European Union. Sixty-two percent of our total exports are not affected by trade fragmentation or protectionism. We are integrated into a vast geography with a market size of $30 trillion. We also have close relations with some Middle Eastern, Central Asian and African countries where there are no free trade agreements,” he added.
“This structure makes us more resistant to global trade fragmentation. We also see this period as an opportunity to deepen regional integrations.”
Şimşek also pointed to Türkiye’s relatively low debt burden as a major advantage. While total debt amounts to just 93% of gross domestic product (GDP) in Türkiye, the average among peer emerging markets is around 245%.
He emphasized that there is no debt-related obstacle to Türkiye's growth, saying, "Since our debt stock is low, when market fluctuations end, Türkiye's strong foundations will once again attract the attention of investors."
Şimşek said the government wants to use the economic program to transform advantages into lasting gains.
"We are striving to turn the turbulence and challenges in the world into opportunities for Türkiye. The disinflation process, which is the main goal of our program, continues successfully, with annual inflation declining for 10 consecutive months," he noted.
The March inflation marked a drop of over 37 percentage points compared to last year's peak, he added.
"The delayed effect of monetary policy, stronger support from public finances and supply-side reforms will further drive down inflation."
Şimşek also said savings and fiscal discipline would be sustained.
"The expenditure discipline and savings measures initiated last year will be continued this year. There is a significant improvement in external balance, and our gross external financing needs are decreasing," he noted.
Şimşek went on to note a sharp decline in Türkiye's current account deficit, which has declined from over $55 billion in May 2023 to $12.8 billion as of this February.
Excluding gold imports, Türkiye is running a current account surplus with moderate growth, he noted, emphasizing that they are accelerating structural transformation efforts to make this trend permanent.
Declining oil prices are also expected to further support the narrowing of the deficit.
