Minister Şimşek: The economy has entered a positive cycle

Treasury and Finance Minister Mehmet Şimşek pointed out that inflation expectations had improved following the shocks and that inflation had continued to fall, saying, "Therefore, when you look at the big picture, I believe the shocks were managed well. We have returned to pre-shock levels." Şimşek made assessments of the current situation on a Kanal 7 broadcast. Pointing out that the last few months have been quite intense in terms of both domestic and external shocks, Şimşek said that the economy has returned to a positive cycle. Şimşek stated that the process was well managed, saying, "Most financial indicators have returned to the pre-shock period. Our gross reserves were slightly above $170 billion in mid-March. We are now back to $170 billion. When you look at the daily Central Bank balance sheet, gross reserves are currently around $172 billion. Therefore, we have returned to the levels before the shocks began in gross reserves. Excluding swaps, there has been a more than two-thirds recovery in net reserves." Şimşek, reporting that the country's risk premium (CDS) reached 380 from around 256 during this period, said, "It's now back down to around 280. Most of the financial indicators you look at have returned to mid-March. Looking at the real economy, there's been a tightening in financial conditions. This tightening has had its effects. But now, financial conditions have started to ease again. Last month, financing costs first dropped from around 49% to around 46%. Now, they're around 43%. There's a loosening in financing costs, or rather, interest rates." Şimşek, stating that growth continues moderately and that they have not experienced a significant deterioration in the current account deficit, said, "We are maintaining spending discipline. We will not, so to speak, miss the budget targets on the spending side. There will be no deviation. But as you can appreciate, economic growth is moderate. It is running slightly below our projections. This is negatively impacting our revenue performance." "WE ACTED IN ACCORDANCE WITH INTERNATIONAL NORMS" Şimşek pointed out that trade wars are a factor that reduces risk appetite and triggers fund outflows from countries, reminding that wars were also occurring in the region. Noting that oil prices rose above $70 a barrel at the time and then fell again, Şimşek made the following assessment: "These are all developments that directly or indirectly affected us. What did we do? We acted rules-based. We acted in accordance with international norms. We didn't panic. We took the necessary measures, at the required dose, and when necessary. The program has proven its effectiveness. We faced multiple shocks. However, despite this, inflation expectations are improving, inflation continues to fall, the current account deficit is under control, and moderate growth continues in the real economy. Therefore, when you look at the big picture, I believe the shocks were managed well. We have returned to pre-shock levels." "THE NUMBER OF COMPANIES THAT HAVE DECLARED CONCORDATION IS BELOW 3,100" Şimşek pointed out that when financial conditions get tighter, complaints from the real sector and economic actors increase and continued his words as follows: "We are aware of this. But the deterioration in the balance sheet of the real sector is not at the extent it is expressed from time to time. The number of companies that have declared concordat is below 3,100. The latest figure was around 3,072 for the January-June period. The share of these companies in the total private sector turnover is 0.69 percent, their share in total exports is 0.59 percent, their share in employment is 0.78 percent, and their share in total cash loans is 0.88 percent. When you look at all the indicators, the share of all companies that have declared concordat in the real sector is below 1 percent." Şimşek, who shared the information that the ratio of bounced checks to total checks was 2.6 percent as of June, said that the 12-year average of this ratio is 2.6 percent. He reported that it was 2.5, so there was no major deviation from long-term averages. Şimşek stated that as of June, only 1.6 percent of commercial loans had collection problems, and the long-term ratio was 3.1 percent, adding that the current level remained below the historical average. "WE MAKE NEW DECISIONS AS NEEDED" Explaining that they evaluate risk elements at the Financial Stability Committee and take steps accordingly, Şimşek said that they intervene and make new decisions as needed. Pointing out that the Central Bank announced a forecast range for inflation, Şimşek said, "24 percent is the midpoint, 29 percent is the upper point of that forecast range. We sincerely believe that we will be somewhere between the midpoint and the upper forecast range for inflation by the end of the year. We forecast a figure below 29 percent. We do not foresee any deviation in inflation this year." Şimşek, stating that the citizens' agenda is the high cost of living, said, "The essence of our program is to combat the high cost of living. We are seeking to permanently reduce inflation and permanently increase the purchasing power of our nation and citizens." Şimşek pointed out that they aim to end the annual inflation, which is currently 35 percent, in the 20s by the end of the year, saying, "That is, below 30 percent. If it weren't for the agricultural frost and drought, food inflation would most likely have been below 30 percent in June. It is currently 30.2 percent." "Reminding that headline inflation is at the level of 35 percent, Şimşek pointed out that there is a significant decrease in this item compared to last year and a decrease of half compared to 2022-2023. Şimşek stated that rental inflation is currently down to 83 percent and that it is rent that keeps the headline inflation up, and that there is a backward indexation in rents. Stating that they aim to increase home ownership by permanently reducing inflation and increasing the housing supply, Şimşek used the following statements: "In summary, I am trying to explain this: inflation is falling, in fact, the fever of inflation felt by our citizens is decreasing, inflation is currently declining, slowing down. A decrease in inflation does not mean a decrease in prices. Prices continue to increase all over the world, a decrease in prices is a very exceptional situation. A decrease in inflation means a slowdown in the rate of increase in prices. Therefore, we will reduce inflation below 30 percent this year. Next year, we will easily reduce it below 20 percent. Our upper band next year is 18 percent, This year, it will be 29 percent. Therefore, we will keep inflation within the forecast range, and everyone should make their calculations accordingly."