Newsletters & Press

June 2023

Following the victory of President Recep Tayyip ERDOGAN in the presidential elections held on May 28, 2023, Türkiye entered a period of economic policy overhaul with the new government's first priority: fighting inflation.

The Central Bank raised its policy rate by 650 basis points from 8.5% to 15%, a first in two years. Although this major change of direction was foreseeable after the appointment of Mr. Mehmet SIMSEK (liberal) as head of the economy and the new president of the Central Bank Mrs. Hafize Gaye ERKAN, the markets had anticipated a more substantial increase (around 21%). After the announcement of this increase, the Turkish lira, already under pressure, continued to fall against the euro and the dollar: as of June 26, 2023, 1 euro was trading at more than 27 Turkish liras (against around 20 liras Turkish one month before). The Central Bank nevertheless hinted that interest rate hikes may continue until significant improvement is achieved. High inflation and the weak lira continue to pose major challenges for the Turkish economy, with the aim being to bring the inflation rate below 10%.

In parallel, the government announced a 34% increase in the minimum wage; the Turkish minimum wage thus goes from 8,506 TL to 11,402 TL (net) per month (≈ 439 EUR). This is the second increase in the minimum wage since the beginning of the year.

Other priorities for the new government include geopolitical relations. The appointment of Mr. Hakan FIDAN as head of the Ministry of Foreign Affairs was warmly welcomed by the heads of diplomacy of many countries, including the French Minister Catherine COLONNA who congratulated her Turkish counterpart. The former head of MIT, Turkey's intelligence services, which he led for more than 10 years, intends to establish a zone of security and peace around Turkey as new challenges loom on the international scene, particularly in relations with Russia. The Turkish president immediately called his Russian counterpart to express his support for the failed rebellion of the paramilitary group Wagner against the Kremlin.

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