Turkish deputy PM: Lowering inflation to support growth

Deputy Prime Minister Mehmet Şimşek spoke at the General Assembly of Turkish Industrialists and Businessmen's Association (TÜSİAD) and mainly focused on the Turkish banking sector, inflation and interest rates. He said that as there are no problems regarding the quality of assets of the Turkish banking industry, this year the number of non-performing loans might decline.

On the higher-than-expected and targeted inflation rates Şimşek said that the current picture indicated an inflation of around 10 percent, which is a great threat for the whole of the Turkish economy, as it threatens to slow down economic growth. Therefore, he said that inflation rates should be lowered to the lowest stable, sustainable level possible.

"The inflation is mainly due to devaluation of exchange rates and increasing food prices. In order for inflation to drop, first, relative stability is required in foreign exchange rates. We are currently working on precautions against rising food prices. In order to permanently eliminate the problem of inflation, we also have to lower unit costs and improve supply, along with the implementation of structural reforms," Şimşek said. He also said that the current account deficit is still a major issue and the trend of decline observed in household savings is being reversed, and with the increase in the minimum wage, the growth rate is estimated at around 4.5 percent while the targeted rate of 5 percent can only be achieved and sustained with the implementation of successful structural reforms. President Recep Tayyip Erdoğan attended a meeting of the Young Businessmen Confederation and touched on interest and growth. He said that he is very sensitive about the issue of interest and thinks interest rates is the main reason behind high inflation rates. "Those who are in favor of increasing interest rates are damaging both investment and employment just to keep their own income at a certain level. Therefore, we will continue to deliver warnings to the related authorities," Erdoğan said. Asserting that the 4 percent growth in 2015 is almost certain, Erdoğan said that despite the negative decisions and statements from international credit rating agencies, the Turkish economy had a much better year than predicted and that he hopes growth estimates will be exceeded in 2016.