Turkish Treasury and Finance Minister Mehmet Simsek has pledged to increase currency reserves as the International Monetary Fund (IMF) predicts slower growth and a narrower current-account deficit for Turkey in 2024. Simsek made this commitment after meeting investors in London and aims to boost confidence in Turkey’s economy while attracting foreign capital. The IMF has applauded Turkey’s policy shift and believes that the country’s growth will slow to 3.25% in 2024 compared to 4% in 2023 as monetary policy tightens. The current-account deficit is also expected to decrease to around 3% of the gross domestic product in 2024, with inflation decreasing from 69% at the end of 2023 to 46% by December 2024.
The IMF emphasized the need for Turkish authorities to continue their efforts in disinflation, specifically by ensuring that the ex-ante real policy rate becomes contractionary. It also recommended the ongoing liberalization of financial regulations to enhance the functioning of money and credit markets, as well as the containment of the fiscal deficit. Simsek, appointed by President Recep Tayyip Erdogan to oversee the country’s economy alongside Central Bank Governor Hafize Gaye Erkan, has taken actions to raise the policy rate, increase taxes, and liberalize certain financial sector measures. These actions have reduced risks, enhanced investor confidence, compressed spreads, and improved the reserve position of the Central Bank of Turkey.
Overall, the IMF encourages the Turkish government to build on the positive momentum achieved so far and continue to prioritize measures that promote disinflation, financial market liberalization, and fiscal deficit control.
