President Erdoğan, Finance Minister Şimşek reiterate continuation of tight monetary policy after blow in local elections

Duvar English

The March 31 local elections dealt a huge blow to the ruling Justice and Development Party (AKP). The party not only lost some of its key municipalities and strongholds to the main opposition Republican People’s Party (CHP), it came second after the CHP for the first time in its foundation, since 2002.

The results shocked Turkey as some experts commented that the AKP could not attract enough voters to go to the polling stations amid never-ending and unabating high inflation, the continuation of trade relations with Israel, and worsening economic conditions of the pensioners.

The results brought a question of whether President Recep Tayyip Erdoğan would want to continue the tight monetary policy, which was implemented only after the May 2023 general and presidential elections.

Ankara's annual "medium-term programme" set a milestone in a broader policy U-turn during the 2023 summer after Erdoğan named a new cabinet and central bank chief. Since June, the new central bank has raised the interest rates from 8.5 percent to 50 percent, so far.

In a traditional “balcony” speech, Erdoğan on late March 31 said they have “stayed away from populist steps that would cost our country, our nation, and future generations. We will start to see the positive results of our economic program, especially inflation, in the second half of the year.

He also hinted that the election periods in the last year also fueled economic worsening, and said, “Even the closing of the election agenda as of today, which has exhausted our country, our nation, and our economy for the last year, is a great gain. Turkey has more than 4 years' worth of treasure ahead of it. We cannot waste this period with discussions that will waste the time of the nation and the country,” he said, closing the doors for an early election, for now.

“From our business world to the bureaucracy, from shopkeepers to farmers, merchants, workers, and students, everyone will be able to focus on their real agenda,” he added.

Similarly, Finance and Treasury Minister Mehmet Şimşek on April 1 said in a social media post that they “will continue to strengthen and resolutely implement our medium-term programme.” 

“In addition to tight monetary policy, selective credit and incomes policy, we will prioritize savings by controlling public expenditures to permanently reduce inflation to single digits, which is our main target. With the structural reforms we will implement, we will realize the transformation of the economy and increase productivity and competitiveness. Thus, we will achieve our goal of sustainable growth and the permanent increase in welfare will be shared by all segments of society. The road to success requires perseverance, determination, and patience,” he concluded.

Meanwhile, Vice President Cevdet Yılmaz also said on April 1 that “we will start to see the results of our fight against inflation in a significant way in the second half of the year.”

“Thus, we will prevent wage increases from eroding over time and ensure a permanent increase in welfare. While undertaking structural reforms in the economy, we will focus on improving the efficiency of public administration, raising our democratic standards, and establishing a more efficient justice system,” he added in a social media post.

According to official figures from the TÜİK, annualt inflation climbed to 67.07 percent in February, whereas the independent inflation research group ENAG put the figure at 121.98 percent.

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