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March 12, 2021

Europe

TURKEY: Long on aspirations, short on reforms

BY Wolfango Piccoli

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( 2 mins)

President Tayyip Erdogan failed today (12 March) to make good on his long-standing pledge of economic reforms that would help Turkey to move to a new economic era. In his 65-minute long speech, Erdogan talked mostly about preferable economic outcomes (digital economy, single digit inflation, increasing exports, etc.) but failed to mention any genuine economic reform. He also made no mention of the Central Bank and interest rates. However, he said that fighting inflation remains a priority and that the goal is to bring it down to single digits. On the positive side, it is worth noting that Erdogan did not mention his son-in-law Berat Albayrak during his speech.

The Turkish president promised to increase transparency in public tenders (no details on how this could be achieved) and to maintain fiscal discipline. In this regard, Erdogan indicated that the government will target a budget deficit of 3.5% of GDP in 2021. The rest of the speech was noticeable for the frequent use of buzzwords like “fintech”, “digital” and “bio-technology.”

These are some of the other points made in the speech:

  • Some extra-budgetary funds will be abolished, and their funds transferred to the main budget to improve transparency;
  • Increased usage of TL-denominated bonds;
  • Around 850,000 small tradesmen to be exempt from income tax (unclear of only for 2021);
  • Provision of 100,000 TL loans (2y) with a 6-month repayment waiver for businesses who employ more workers;
  • The scope of the Credit Guarantee Fund will be widened;
  • Increases in prices administered and directed by the public will be based on targeted inflation rather than actual inflation;
  • Creation of a price stability board to deal with rising prices and a special monitoring system to help slow food prices;
  • Legislation will be introduced to securitize NPLs and take them off banks’ balance sheets.