Turkey's economic reforms: first successes and next steps

18 January 2021

This week, the Turkish president said that the country does not intend to deviate from the course of economic reforms, and also announced its main goals and current achievements

On Friday, January 15, Turkish President Recep Tayyip Erdogan said that the state will not make changes to reforms related to increasing economic confidence and ensuring stability in the coming months. During the meeting of the Council for Foreign Economic Relations (DEIK) in Istanbul, the President noted that no changes in budget discipline are also expected.

At the moment, Turkey has completed intensive preparation of its economic and judicial reform program. According to Erdogan, the main goals for 2021 will be to maintain price stability and fight inflation.

During the meeting, the importance of keeping interest rates low was also stressed. Exchange rate stability is also crucial for the country as it struggles with inflation approaching the 15% mark.

In November, Erdogan made a promise to create a new favorable base for the Turkish market. Since then, the Central Bank of the Republic of Turkey (CBRT) has raised interest rates by 675 points to 17% under its new governor, Nasi Agbal, and has taken a number of other steps that have led to the appreciation of the Turkish lira. The Central Bank is set to hold its next policy meeting next week.

Erdogan also stressed the importance of four main areas: investment, employment, increasing production and exports.

Meanwhile, the Finance Ministry released data showing a budget deficit of 172.7 billion liras ($23.2 billion) in 2020 and a primary deficit of 38.8 billion liras. The deficit was below the 239 billion lira indicated in the new economic program announced in September.

According to the country's new economic program, the government expects the ratio of the budget deficit to gross domestic product to be 4.9%. Turkey also intends to reduce its deficit-to-GDP ratio to 3.5% this year.