Turkey Vows to Build Reserves as IMF Sees Slower Growth in 2024

Turkish Treasury and Finance Minister Mehmet Simsek vowed to build up currency reserves as the International Monetary Fund forecast slower growth and a narrower current-account deficit for 2024 as Turkey tightens its monetary policy.

“We will continue to accumulate international reserves as much as market conditions allow,” Simsek said in a message on X, formerly Twitter, late Friday after meeting investors in London.

Simsek sought to bolster confidence in Turkey’s economy and attract foreign capital through a series of meetings with global investors this week. The IMF welcomed Turkey’s policy shift in a coinciding statement late Friday.

As monetary policy tightens and the overall policy stance becomes less accommodative, Turkey’s growth is projected to slow to 3.25% in 2024 from 4% in 2023, the fund said following a recent visit to Turkey and ahead of its release of its World Economic Outlook on Tuesday.

Turkey’s current-account deficit is expected to narrow to about 3% of the gross domestic product in 2024, while inflation should slow to 46% by December 2024 from 69% at end of 2023, the fund said.

“The authorities should build on the current momentum,” the IMF said. “This requires prioritizing disinflation by bringing the ex-ante real policy rate into contractionary territory, continuing to liberalize financial regulations to improve the functioning of money and credit markets, and containing the fiscal deficit.”

Simsek, an ex-Merrill Lynch strategist, was appointed by President Recep Tayyip Erdogan after elections in May to helm Turkey’s the $900 billion economy, alongside Central Bank Governor Hafize Gaye Erkan, a former Wall Street banker.

Simsek and Erkan have since steered Turkey toward more orthodox economics, breaking from years of ultra-loose monetary policy that contributed to an inflation crisis and prompted an exodus of foreign investors from lira-denominated assets in Turkey.

“The recent actions to raise the policy rate, increase taxes, and liberalize some financial sector measures have reduced risks and lifted investor confidence, compressing spreads and improving the reserve position of the Central Bank of Turkey,” the IMF said.

Source from: Bloomberg