Türkiye's economy chief on Thursday said the country's monetary policy is fully functional and the policy mix going forward will be more supportive, but more time is needed to see its effects and convince society at large.
"We're doing all the right things, we're on the right track, but we need time to show results, to convince the broader society," Treasury and Finance Minister Mehmet Şimşek said at an event on the sidelines of the spring meetings of the International Monetary Fund (IMF) and the World Bank in Washington.
Şimşek said part of the structural transformation of Türkiye's economy goes along with a new industrial policy, which he said will be "pretty transparent and rules-based."
"We want to channel resources to more productive areas, to reduce our carbon footprint, to make the economy more competitive, but also to see how we can enhance growth potential to higher productivity," he said, adding that the green transition is not a choice, but a necessity.
"When it comes to economic complexity, we know where we stand in the value chain. We're not where we would like to be, and that's why the reform comes in."
In what could be a boost for manufacturing and trade, he said, "Türkiye is one of the best candidates in terms of friend-shoring and nearshoring, which is the new norm post-pandemic and with all these geopolitical tensions and geostrategic competition."
He insisted that tackling inflation remains the top priority, as are enhancing competitiveness, boosting productivity and improving the investment climate.
Data earlier this month showed annualized inflation climbed to 68.5% in March, yet Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan on Tuesday said it is on track to reach the 36% target by the end of the year. Yet, he said markets believed the target would be achieved with a three-month delay.
The central bank has raised its key one-week repo rate by 4,150 basis points from 8.5% to 50% since last June, mainly seeking to ease demand, the main driver of inflation.
After last month's 500 basis point hike that stunned the markets, the bank cited a deteriorating outlook and pledged to tighten even further if it expects the price situation to worsen significantly.
"We need to tighten the fiscal stance to provide more support to (the) central bank, to bring inflation down at a time when inflation was de-anchored, where pricing behaviors were pretty ... unruly," Şimşek said on Thursday.
Inflation is expected to peak at around 75% in the coming months, according to Karahan, before entering what officials expect to be a steep downward trend in the second half of 2024.
The minister added that the sharp decline in the cost of insurance against a sovereign default, alongside positive comments from rating agencies, are evidence that investors have regained confidence in the Turkish economy and markets.
Türkiye walked away from years of easing policy after last year's presidential and parliamentary elections. It delivered aggressive tightening aimed at cooling demand to curb inflation, rebuilding reserves and flipping chronic current account deficits to surpluses.