The Turkish Central Bank’s decision to increase the top interest rate 300 basis points to 16.5 percent has brought relief, Turkish Industry and Business Association (TÜSİAD) chair Erol Bilecik has said, warning of a high inflation rate and burden of debt.
“The step taken by the Central Bank on May 23 has caused relief to some extent. We wish to see the continuation of policies and discourses giving priority to stability, and the policy making process of the economy management in accord and harmony in the following period,” he said at TÜSİAD’s High Advisory Council meeting in Istanbul on May 24.
“Transient measures and packages that do not depend on foreseeable policies puts the sustainability of a country’s economy under question. Hence, the upsurge in exchange rates shows that the questioning of the Turkish economy has started. We need to reestablish confidence in our economy immediately. Otherwise, our economy will face a hard correction,” he added, referring to the Turkish Lira’s depreciation by almost 25 percent since the beginning of the year.
The value of the lira responded to the Central Bank’s decision by rising to around 4.58 per dollar, after it had dropped to over 4.80 per dollar, down about 5 percent since the previous day. However, one dollar traded for more than 4.75 liras on May 24.
Bilecik also called the government to implement the structural reforms to lower the inflation rate and ease the debt burden.
“We have stated in many occasions that we should make the much needed economic reforms in times of abundant and cheap money in order to deal with the hardships we may face in a possible contraction. If you try to solve your problems after the hardships arrive, you will need to bear much higher costs,” he added.
The TÜSAİD chair warned of postponing solutions to problems, such as foreign debt dependence. “There are no miracles in the economy, there are only realities,” he said.