Türkiye’s combat towards inflation is “bearing fruit,” and it is important for the financial and monetary insurance policies to be maintained, the Organisation for Economic Co-operation and Development (OECD) chief economist, Alvaro Pereira, mentioned Tuesday.
He mentioned that the annual common inflation is anticipated to be round 30% this yr, 18.5% subsequent yr, citing forecasts from the outlook report printed by the OECD on Tuesday.
“Inflation usually has a huge impact on people and on their real incomes, and so, bringing down inflation has to continue to be a top priority for Türkiye, and we think that the policy is working,” he informed Anadolu Agency (AA).
“It’s important (for) both monetary and fiscal policy to continue in the same way, so that you are able to continue to bring down inflation.”
His remarks got here the identical day as official knowledge confirmed the annual inflation in Türkiye eased additional to 35.41% in May, marking the bottom since late 2021.
Pereira famous that it normally “takes a while for things to change in a dramatic way” and that it’s “not surprising that (inflation) is sticky,” saying that inflation in service costs is stickier than items costs.
“It’s not surprising that the process takes a bit longer than it was anticipated at first, but we think that maintaining the policy is absolutely essential on political developments,” he mentioned. “Right now, the most important thing is that, in terms of fiscal and monetary policies, the way, the movement will have to be in the same direction, independently but together.”
In its report, the OECD mentioned that each “fiscal and monetary policies have contributed decisively to the recent decline in inflation.”
Citing the most recent OECD estimate, he added that Türkiye’s finances deficit is anticipated to fall to three% of gross home product (GDP) subsequent yr, largely resulting from improved income efficiency, whereas capital spending will decline.
According to the OECD estimate, shared on Tuesday, the fiscal deficit is anticipated to say no from 4.9% of GDP in 2024 to three.3% in 2025 and three.0% in 2026.
Pereira, in the meantime, additionally said that U.S. tariffs that shook the worldwide financial system and commerce is not going to have a serious impression on the Turkish financial system, however it is very important “find a solution and get some sort of an agreement with the U.S. administration to lower trade barriers between the two countries.”
“Türkiye has some industries that can certainly export even further to the U.S.,” he mentioned.
“More tourism could be interesting, (as) Türkiye is a beautiful country with wonderful culture, and you have a lot of tourism but you have the potential to bring even further, and so, if you get good macroeconomic stability at the same time that you’re able to get an agreement with the U.S., I think this will also help to bring more foreign direct investment (FDI) and more tourism to the country,” he added.
Macroeconomic stability
Pereira emphasised that macroeconomic stability attracts international traders for long-term investments within the nation.
“In every single country that attracts a lot of FDI in the long and medium term, (they) usually need to have macroeconomic stability. That’s why I insist that, to bring down inflation and (we need) to make sure that we have finances, competitors (and) liabilities under control,” he mentioned. “You have to have a friendly business environment, and there have been some interesting reforms in the past few years with that.”
“We have to work on two levels first to continue to bring down inflation and to make sure that the fiscal situation is under control, that’s first thing, and second thing is, in certain areas of Europe, Türkiye can be more competitive, and continuing there, form a path to trying to improve business climate is going to be absolutely essential-if we continue to work on those bills, and I think this will help Türkiye,” he mentioned.
“But still, more can be done to bring down red tape and to improve regulations,” Pereira mentioned. “In Türkiye … bringing down those barriers and improving the business climate should be a top priority way forward.”
He talked about that uncertainties over the worldwide financial system have but to weaken, because it stays excessive in the case of financial and commerce insurance policies. He mentioned these uncertainties have began to have an effect on client and business confidence, in addition to financial exercise indicators.
Pereira highlighted that the U.S. tariff uncertainties are hampering world financial development. The OECD downwardly revised its development forecasts for this yr and the following for nearly all nations resulting from this final result.
He warned that these developments might gasoline additional inflation in some nations, advising them to attempt to negotiate to succeed in an settlement to scale back commerce obstacles to keep away from additional commerce fragmentation, particularly between the U.S. and China.
“Both economies still depend on each other, so each economy brings something to the table the other does not have-we hope that the two biggest economies in the world get some sort of a deal, so that they’re able to reduce uncertainty (and) trade barriers, and get to a situation in which we have (them) doing better going forward,” he mentioned.
Global development estimates decrease
The OECD downwardly revised its world financial development for this yr from 3.1% to 2.9% in its newest report launched on Tuesday.
The group’s March launch estimated that the worldwide financial system would develop 3% subsequent yr, however it downwardly revised its 2026 development forecast to 2.9% as properly.
These downward estimates come after a 3.3% world financial development final yr, in accordance with the OECD.
The group cited elevated uncertainties over commerce insurance policies for its downward revision.
Meanwhile, the Turkish financial system’s development outlook was downwardly revised from 3.1% to 2.9% for 2025 and from 3.9% to three.3% for 2026, as per the most recent OECD Economic Outlook report.
Source: www.dailysabah.com