Turkey hopes Russia-Ukraine conflict will end soon as possibletreasury and finances minister noted on Friday, as fears grow over the consequences of crisis.
Nureddin Nebati’s remarks are the first detailed evaluation by an economist official on the potential impact of The Moscow Aggression on son southern neighbor on Turkey economy.
Nebati also addressed the governmentthat is new recent economic policy steps as well as concerns over inflation.
Turkey shares a sea border with Russia and Ukraine and has good ties with both. He cooperates closely with Russia in energy, trade and defense. It has depth defense connections with Ukraine. And the two markets are among the most important tourist sources in the country.
“Of course, the duration and the size of war is important in impact of this unwanted geopolitical tension on our economyNebati told Anadolu Agency (AA).
“It’s our most grand wish may this war end like soon like possible.”
Ankara is facing a difficult balance exercise car its Black Sea neighbors are also among its main economic partners. He criticized the invasion as unacceptable but avoided harsher rhetoric of other members of the alliance and opposes their use of sanctions, seeking means of mediation in crisis.
“The most important thing for to increase prosperity not only from the point of view of our country but also in terms of the region or U.S live is that the climate of peace and quiet reign. This is for earnings of all of us“said Nebati.
Impact of ‘great importance’
Turkey trade with Russia and Ukraine have reached a record high in 2021. Volume with Russia reached 34.7 billion dollars (494 billion TL), while the turnover with Ukraine jumped to $7.4 billion.
Russia ranked 10th among its biggest export markets last year and came in second when it comes to imports. Ukraine ranked 20th in exports and 13th in imports, Nebati said.
“The share of these two countries in our exports is 3.9%, while their share in our imports is 12.4%”, the minister Noted.
Geopolitical developments in recent history affected the Turks economy like other countries said Nebati.
But he stressed the impact of the Russian-Ukrainian war “is of even greater importance, given the size of our commercial and tourist relations with both countries and our contractual services.
Some 4.7 millions of Russians and 2.1 millions Ukrainians arrived in Turkey last yearaccording to data from the Ministry of Culture and Tourism.
They counted for 27.34% of the total 24.7 millions foreign tourists arriving throughout the year minister noted. the share jumped 24.55% in 2020 and 19% in 2019.
Energy and inflation
On the energy front, the conflict has given rise to the prospect of same higher inflation in Turkey, an importer of oil, natural gas and cereals, the prices of which exploded due to the tensions.
“For our country, which is an energy importer, the rise in energy prices, especially oil and natural gas, and the increase in the prices of other raw materials have a negative impact on the current account balance and inflation,” Nebati said.
Turkey’s annual inflation rose to 54.44% in February, official the data showed on A two-decade high on Thursday was fueled by a slide in Turkish lira late last year and higher raw material prices.
The annual producer price the index rose to 105%, reflecting rise in commodity prices in the context of the Russian-Ukrainian conflict.
He awarded the top course in consumer and producer prices under pressure caused by the prices of energy and other raw materials.
“I would like like particularly emphasize that the fight against inflation is one of our most important policy priorities. We remain committed to this issue to the greatest extent”, the minister added.
In order to mitigate the impact on households, government last reduced tax month on basic goods at 1% versus 8% and subsidized a significant share amount of electricity bills.
This also announced a value-added tax reduction (VAT) on electricity used for for residential and agricultural irrigation purposes from 18% to 8%.
This also introduced a set of measures for reduce surge power invoices, including the readjustment of the level below which higher electricity tariffs for households and some businesses using more energy kick in.
“We are committed to maintaining our holistic perspective that prioritizes fight against inflation in the coming period in in order to complete these steps we took,” he said.
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Russia was the top market for Turkish entrepreneurs, said Nebati, accounting for 36.4% of projects that builders have undertaken abroad, according to 2021 data. Ukraine ranked fourth with a 5.2% shareil added.
The lira has been broadly stable since start of the year following 44% decline in 2021 and was hovering just below 14 against United States dollar.
But it exceeded the level last week with the return of volatility over rising tensions between Moscow and Kyiv.
This has hit a record moo of 18.4 in end of December but rebounded after the governmentit is announcement of a program to boost lira deposits by protecting them against depreciation.
Volume of lira deposits protection reached 535 billion TL as of Thursday, Nebati said, up about 200 billion TL in at the end of January.
Authorities are pursuing a new economic policynicknamed Turkey’s economic model, based on low interest rates to boost credit, exports and investment, saying it would be help the country weather inflation.
President Recep Tayyip Erdogan says the policy will also ultimately help Turkey solve it’s chronic current account deficit problem and help stabilize lira.
For support the central drivele bank had brought down the reference policy rate per 500 points since September at 14% but interrupted the easing cycle in January and kept the one- rest week rate unchanged last month again.“
We will reach a value-added growth performance by offering a high employment rate with the new economic model that focuses on investments, production and exports,” Nebati said.
Turkey economy bounced back back of the COVID-19 pandemic to grow by 11% last yearson highest rate in a decade. Gross domestic product (GDP) increased by 9.1% year-over-year in the fourth quarter.
“In this context, the indices for the first quarter of 2022 indicate that the positive outlook for growth will continue,” Nebati said.
