Turkey must fight inflation and avoid recession, VP says

Turkey must sustain its push on production and exports to prevent the economy falling into recession even as it fights inflation, Vice President Cevdet Yilmaz said on Friday. 

Since May elections, President Recep Tayyip Erdogan’s government launched a U-turn away from unorthodox policies including interest rate cuts that had sparked a lira crisis and sent inflation soaring. 

Since June, the central bank has reversed and hiked its policy rate by 900 basis points to address inflation, which leapt to a 25-year high above 85% last year and is expected to rise again to a peak above 60% in 2024. 

Erdogan said after a cabinet meeting this week that the government will lower inflation to single digits but will not sacrifice economic growth and employment, comments which were echoed by Yilmaz on Friday. 

“While fighting inflation we are making an effort to sustain production and exports so as not to fall into recession. We have to do both at the same time,” the vice president told reporters after meeting bankers in Istanbul. 

Yilmaz said the government’s medium-term program, setting out its economic plans in detail, would be announced in the first half of September. 

In the meeting with the finance sector the issue of new financial instruments came onto the agenda with sector representatives having spoken of difficulties in financing long-term projects given the short-term deposits in the sector, he said. 

He said the meeting also addressed the issue of encouraging first-time house buyers, adding that the central bank and regulator were working on the issue and that the housing supply needed to be increased. [Reuters]