Finance Minister Mehmet Şimşek: Turkey’s Credit Rating is Starting to Rise

Finance Minister Mehmet Şimşek stated, “Inflation expectations have dropped to around 35% for the next 12 months, and Turkey’s credit rating is starting to rise. Fitch upgraded our credit rating a while ago. Last night, Standard & Poor’s (S&P) also upgraded our credit rating. Therefore, we are on the right path. All of this shows it.”

Şimşek made these remarks at the “8th Turkish-German Economy Day” held in Düsseldorf, the capital of North Rhine-Westphalia state in Germany, where he discussed the Turkish economy and Turkey-Germany relations.

He emphasized the importance of the size of the market where businessmen invest, stating that Turkey has a large market considering its national income and population.

Şimşek pointed out the disruption and fragmentation in global trade, saying:

“Turkey has advantages in nearshoring from neighboring countries and friendshoring from friendly geographies during this period. We have had a dialogue with the European Union (EU) since 1963; we have a partnership. Therefore, we are friends with Europe. There may be some political differences of opinion. But still, we see the EU as a friend through the Customs Union. So, we are both close and friends. We are also close friends with Asia, North Africa, and the Middle East. Therefore, we do not expect trade fragmentation resulting from this geopolitical competition in the world to have a very negative effect on us.”

Pointing to the rapid increase in the working-age population in Turkey over the next 10 years, Şimşek emphasized a 15-year window of opportunity in terms of demographics.

He explained that nearly $280 billion has been invested in infrastructure in Turkey over the last 20 years, saying, “According to the World Bank’s logistics index, we have better infrastructure than 91 developing countries. Therefore, we are advantaged.”

“Stronger Dialogue between German and Turkish SMEs is in the Interest of Both Countries”

Şimşek stated that SMEs form the backbone of the economy in Turkey, and a stronger dialogue between German and Turkish SMEs would be beneficial for both countries.

He also mentioned significant investments in technology and innovation ecosystems in Turkey over the past 20 years, saying, “Indeed, we are taking Germany as an example in this regard. But we need to strengthen dialogue in this regard with Germany. We emphasize the importance of the Turkey-Germany dialogue, especially in strengthening the technology innovation ecosystem. This will be possible thanks to you.”

Şimşek highlighted Turkey’s favorable position in the artificial intelligence readiness index compared to many developing countries, stating that they will continue to invest in AI infrastructure.

“If We Rise in the Value Chain, We Will Be Richer”

Şimşek pointed out that Germany is a very important country in the manufacturing industry globally, and Turkey also has a strong accumulation in manufacturing industry per capita income, saying, “Why are we not rich here? Since we are very good in per capita income in manufacturing industry, why isn’t Turkey richer? Because Turkey is not where we desire to be in the value chain. We have come a long way in the last 15-20 years, but we do not find it sufficient. We have efforts to move up to higher ranks in the value chain.”

Şimşek emphasized Turkey’s significant potential in green products, stating that green transformation and digital transformation are among the top priorities for the country.

“Long Journey, but We Will Succeed Because We Have a Good Program”

Highlighting the importance of energy transformation for Turkey, Şimşek stated that 55% of the country’s installed capacity comes from renewable energy sources, and they will increase this to over 60% in the coming years with investments exceeding $100 billion.

Şimşek stated that if Turkey solves its major macroeconomic problems, its potential will be further strengthened, saying:

“Our top priority is, of course, price stability. In other words, reducing inflation to single digits. Fiscal discipline and structural transformation are other priorities. By structural transformation, I mean, as I mentioned earlier, green transformation, digital transformation, and industrial transformation. All of these are important for sustainable high growth. Unfortunately, inflation is quite high. In May, we will reach a peak with inflation above 70%. Thanks to the program we implemented, inflation will decrease rapidly from the second half of the year, and we will return to single-digit inflation by 2026. It’s a long journey, but we will succeed because we have a good program.”

“Thank You to Germany for Showing Solidarity During the Earthquake”

Şimşek said, “I would like to thank Germany very much for the solidarity and assistance shown to Turkey last year due to the earthquake disaster. We are grateful to the German people and the German state. Germany has always been with us in our most difficult times. We thank them.”

He stated that Turkey has programs to reduce the current account deficit and that they will invest in human capital, improve the quality of education, and improve the investment environment through structural reforms.

Şimşek explained that they set out with legal reforms to eliminate Turkey’s macroeconomic imbalances, stating that the current account deficit has narrowed and investor confidence has returned.

He reported a significant increase in net capital inflows to Turkey, saying, “There has been an increase in reserves. Inflation expectations have dropped to around 35% for the next 12 months, and Turkey’s credit rating is starting to rise. Fitch upgraded our credit rating a while ago. Last night, Standard & Poor’s (S&P) also upgraded our credit rating. Therefore, we are on the right path. All of this shows it.”

“We Can Work Together with Germany in Many Regions in Africa, Central Asia”

Şimşek also made evaluations regarding Turkey-Germany relations, saying, “Together, we are stronger. Germany is a very important and valuable country for us. We have very strong ties with Germany. This is not limited to trade only. We have more of a people-to-people connection. Therefore, we see Germany as a valuable partner.”

He emphasized the importance of Germany during Turkey’s EU membership process, stating, “We can never be separated from Germany. We have very strong ties with Germany. Now we want to strengthen these ties thanks to you. Our trade volume reached around 55 billion euros last year. Over 8,000 large and medium-sized German companies have invested in Turkey, providing employment. Therefore, we have strong ties in this regard. In the coming period, we can work together with Germany in many regions in Africa, Central Asia. So, not only bilateral trade but also this is possible in other areas.”

Şimşek commented on Turkey’s relations with the EU:

“We certainly have an agenda with the EU. The main item on this agenda is the modernization of the Customs Union with the EU to facilitate your trade. We think that updating the Customs Union to cover public procurement and services is in the interest of both Turkey and the European Union. I think tying this to political conditions shows a weak strategic outlook of Europe towards Turkey. Because it is not meaningful to tie it to conditions. We need to make progress in a matter that is clearly in the interest of both countries. I hope that this process will accelerate after the European Parliament elections. Again, in order to do business, business and scientists need to travel. Therefore, visa facilitation is of course important.”

Şimşek emphasized that there is a will and political ownership for the economic program implemented in Turkey, concluding:

“The program has started to yield results. I believe we will succeed. Your presence here strengthens Turkey. When we come to Germany, our citizens ask us, ‘Is there anything we can do?’ My answer has always been, ‘The best thing you can do is to be successful here. Learn the language here, comply with the laws and rules here, create added value here, create employment here, integrate with society here. You will contribute greatly to Turkey in this way.’ This is our approach. We are proud of the success of our citizens and businessmen in Germany. But it is very valuable for us to keep our trade, investments, and ties strong with Turkey. I believe the Turkish economy also offers great successes in this regard.”

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