After a year of significant reforms, the Government remains committed to an ambitious agenda of economic transformation. With no elections for the next four years, Turkey offers great investment opportunities.
It is important to understand what has been implemented since we took office last year, when a currency attack, unprecedented in scale, compounded by a host of other financial fragility was underfoot. Evidently, we were dealing with truly extraordinary events. The New Economic Program was unveiled and we acted swiftly upon assuming office to restore price stability and guide the economy towards a more sustainable growth path. The results of our intervention are encouraging— inflation is already lower than a year ago; and single-digit inflation is within our grasp by September.
The Central Bank continues to take measures independently to pursue its fight against inflation. In tandem we are working to contain food prices by supporting the optimization of supply chains, with an expectation to reap the benefits of such initiatives this autumn.
Following the Structural Transformation Steps announced in April, certain policies have been implemented to improve the economic outlook in the near term as well as to increase the productivity and growth potential in the long term. Our goal is to achieve sustainable growth while addressing Turkey’s main source of fragility, the chronic current account deficit, which has been financed by short-term debt
Looking into the financial system, Turkish banks have capital adequacy ratios well above global benchmarks. However, we remain vigilant: state-owned banks received new capital injections a number of privately-owned banks also raised capital, and the banking regulator has asked all banks to retain earnings.
We want to ensure that the system continues to provide an uninterrupted flow of credit to eligible businesses. The new law on financial restructurings shows our determination in this matter. It is worth noting that several international and domestic investors are interested in forming funds to acquire governemental loans. We are keen to introduce necessary rules and regulations to extend our support to business environment. A major policy initiative to boost domestic savings is to be announced. This will lead to long-term growth and reduce reliance on short-term capital flows.
Exporters have been playing a substantial role in the improvement of Turkey’s current account balance. Their tremendous entrepreneurial drive shown in diversifying export markets to over 200 countries, benefiting from modern logistics, transportation, energy and communications infrastructure, has been the backbone of export market growth. Targeted loan programs, have been designed to further support in this regard.
Our sovereign wealth fund along with other state institutions are actively holding discussions with strategic partners in the pharmaceuticals, petrochemicals, energy and technology sectors in order to bolster the current account and attract foreign direct investment. In addition, significant joint exploration and production opportunities await investors in the Eastern Mediterranean.
We are about to undertake significant transformation of our tax code to strengthen tax administration, realize base expansion and reduce corporate taxes to create investments and jobs. Other reforms including the effective functioning of the judicial system will be addressed before yearend, contributing to a healthier and more predictable investment environment.