President Recep Tayyip Erdoğan on Friday expressed confidence that the country would see capital inflows gaining further momentum with the successful control of inflation.
“We believe that the flow of resources to our country will accelerate even more as the increase in inflation is brought under control,” Erdoğan told an event marking the 150th anniversary of the Borsa Istanbul Stock Exchange (BIST).
“In the upcoming period, we will focus on further deepening the capital markets,” Erdoğan said, stressing that they recognize a “serious potential,” particularly in participation finance.
Türkiye has embraced more conventional policymaking after the May elections and delivered aggressive monetary tightening aimed at arresting soaring inflation, reducing trade deficits, rebuilding foreign exchange reserves, and stabilizing the Turkish lira.
Since June, the central bank has lifted its one-week repo rate by 3,400 basis points. After delivering a 250-basis-point hike on Thursday, the bank suggested it was closer to the finish line by saying it expects to “complete the tightening cycle as soon as possible.”
The central bank expects inflation to rise from nearly 62% last month to 70-75% in May, before dipping to about 36% by the end of next year as tightening cools prices.
Erdoğan highlighted the historic significance of the Borsa Istanbul Stock Exchange in Türkiye’s bumpy journey over the past century and a half.
“We are determined to establish a climate where our citizens can evaluate their savings with peace of mind and make them available to the real economy,” the president noted.
Erdoğan emphasized that the high growth potential of the Turkish economy has captured the interest of international investors.
He affirmed the government’s commitment to enhancing the depth of the stock market, stating that it would contribute to easier access to financial resources for investors.
Chanelling savings into investments
Also addressing the event, Treasury and Finance Minister Mehmet Şimşek emphasized BIST’s significance beyond its symbolic history and its reflection of societal and economic development.
Şimşek cited a growth in gross domestic product (GDP) from $238 billion to an estimated $1.1 trillion by the end of this year. He underscored the 10.5-fold increase in the market value of Borsa Istanbul over the past 21 years.
Borsa Istanbul is crucial in channeling small savings into investments, facilitating healthier, more sustainable, and long-term financing for companies’ growth and operational needs, the minister said.
“It is critical for our companies to acquire investment, growth, and operational financing through capital market instruments,” he noted.
Şimşek acknowledged the existing gap between Borsa Istanbul and similar international stock exchanges, and stressed that the BIST is a vital platform for capital markets.
“It is not a playground. Therefore, the efforts made by the Capital Markets Board (SPK) will be even more effective in the period ahead,” he noted.
Şimşek also underlined the government’s economic road map, unveiled in September, and the importance of financial stability.
“We have gained momentum in ensuring financial stability. One of the objectives of the Medium-Term Program is to deepen capital markets. Predictability will increase in the upcoming period with the Medium-Term Program,” Şimşek affirmed.
The minister also underscored the importance of financial literacy, as he noted that 8.6 million individuals are involved in stock market investments, stressing the necessity of widespread financial education.
Turning to the importance of steering savings toward investment, employment, production, and exports, Şimşek underscored the need for robust price stability.
“There is also serious progress in this direction. There has been a loss of momentum in monthly inflation in recent months, and I believe that this loss will gain even more momentum in 2024. Thus, the way for our capital markets will be opened in a much stronger way,” he added.
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