Evaluating the economic developments, TÜSİAD President Orhan Turan pointed out that Turkey presents a different preference in the economy and said, “The economy cannot function without price stability.”
Orhan Turan, Chairman of the Board of TÜSİAD, organized by the TÜSİAD Economic Research Forum (EAF). “How Fed Policies Affect Emerging Economies and Turkey?” He delivered the opening speech of the seminar.
Evaluating the economic developments in Turkey, Turan emphasized that the economy would not function without price stability and stated that the first priority should be the fight against inflation.
The headlines from the speech of the President of TÜSİAD are as follows;
“We are heading towards recession”
“In the last three years, the global economy has been exposed to significant supply shocks. We are witnessing the destructions first caused by the Covid pandemic and then by the Russia-Ukraine war on the supply chain. As we approach the year 2023, global economies are struggling with high inflation on the one hand and stagnating on the other. they are moving towards.
The persistently high course of inflation for a much longer period than expected in the recent period results in a tightening of monetary policy by all major central banks, especially the US central bank, which we anticipate will be long-term. In particular, we follow the hawkish stance of the FED, which prioritizes price stability despite the possibility of recession.
“Without price stability, the economy will not function, our priority should be the fight against inflation”
Let’s not forget that the economy will not function without price stability, and it will not benefit any stakeholder. Therefore, if we are aiming for an economy that functions in a healthy way and where all segments benefit, our first priority should be the fight against inflation. Today, we witness interest rate hikes in all of the G20 countries, where the fight against inflation comes to the fore. We must remind ourselves again that tackling inflation will be challenging in the short run, but it is the only way to long-term healthy growth.
Inflationary pressures are spreading far beyond food and energy, almost all over the world. It also affects the service sector. Businesses face higher energy, logistics and labor costs. Inflationary pressures, which started to become evident in the USA at the beginning of 2022, are now also seen in the Eurozone and the UK, spreading all over the world.
“The appreciation of the dollar will have lasting effects on many economies”
Putting aside the Russia-Ukraine war, another important factor slowing down global growth is the aggressive tightening of monetary policy, as the actual inflation is much higher than the targets. Of course, the rapid tightening of financial conditions in the global economy and the appreciation of the dollar will have lasting effects on many economies.
“There is a greater risk of being under pressure”
Economies with strong economic foundations, low risk premiums and sound balance sheets will come out of this process much more easily. On the other hand, economies that have already entered this process with a high risk premium are at risk of being under more pressure through external borrowing costs and the credit channel.
“Conditions are not in our favour”
We have already entered a period in the global economy where the period of abundant money has decreased and financing conditions will be more difficult than in the past. This process may be longer-term than originally calculated. In this period, Turkey, unlike its peers, put forward a different policy preference. Let’s not forget that the times of economic hardship we experienced in the recent past were the times when the global winds blew behind us. Neither the global outlook nor the global financial conditions are in our favor anymore.”