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Mithat Yurdakul / Ankara
Senior Advisor to the President, Dr. Cemil Ertem evaluated the process that began with the appointment of Şahap Kavcıoğlu as Governor of the Central Bank of Milliyet. Emphasizing that the president’s changes in the Central Bank will not cause a fundamental change in monetary policy, Ertem said: “The current policy is the railroad. “The destination of the road, the scope is safe,” he said. Turkey’s economy is indispensable to Ertem’s freedom of expression, “Let me also add that the effects of currency fluctuations would be limited.” The measures that are taken will compensate for this, ”he said.
Ertem gave the following answers to Milliyet’s questions:
Should a radical change in the monetary policy of the Central Bank be expected after Şahap Kavcıoğlu is replaced by Naci Ağbal, the governor of the Central Bank, or will basic policies continue?
The Central Bank of the Republic of Turkey is one of the oldest and most powerful institutional structures of state institutions in Turkey. In this context, changes of president in the Central Bank do not provoke a fundamental change in monetary policy. Of course, the head of the Central Bank has determinism in the decisions that are made and in the execution of current monetary policy. Each president reflects his own experience, understanding, and interpretation from economic policy to basic politics. But the main thing here is the basic political framework. We can explain this to a locomotive moving on the railroad tracks. The current policy here is the railroad. The destination of the highway, the scope is safe. The president and his team can only move the locomotive forward, fast or slow, depending on road and weather conditions. The effect of the change of president is as great as in this example. Again, based on this metaphor, the Central Bank has instrument independence, not an end. The head of the Central Bank and his team strive to reach the rank in the least expensive way with the tools they have and try to use the tools they have in the most efficient way, this measure of efficiency is individual success or failure. Personally, I believe that the new president will use the tools at his disposal much more effectively to achieve the institutional goals of the Central Bank. This is the basis for all these changes. That is, to ensure the most effective use of the tools of the Central Bank in line with its duty … After all, the duty that the law assigns to the Central Bank is clear. There will be no change on this basis and this task.
THE EFFECTS OF VARIATION WILL BE LIMITED
What kind of fight against inflation is foreseen in the next period?
The fight against inflation must be multipurpose and multidimensional. First of all, it is a social consensus. The fight against inflation cannot be left only in the hands of monetary policy, of the Central Bank. For example, the increase in food prices cannot be responded to through monetary transmission mechanisms. This is related to problems such as agricultural production, distribution-smooth operation of the chain from field to table, etc. Traditional monetary and fiscal policy tools are today often powerless in the face of global supply shocks. So, from agriculture to industry, adequate quality production is the basic solution to inflation in the medium and long term. Of course, the Central Bank will use its monetary policy tools to the fullest and on time. However, tackling low inflation and high inflation is no longer the exclusive task of central banks. Since 2008, the central banks of developed countries have been trying to keep interest rates at near negative levels and to raise inflation very low.
However, this state of crisis has not been overcome, because it is no longer the only job of monetary policy. The fight against inflation is multifaceted and exists as an important theme in this reform program. I think we will get closer to the rates set by the Central Bank after the second half of the year. Let me add that the effects of exchange rate fluctuations will be limited. The measures taken will compensate for this.
DYNAMIC ECONOMY
How should the citizen of the street understand the developments?
Turkey’s economy is a very dynamic economy. We are one of the two countries that closed 2020 with positive growth during the pandemic process. During this period, our healthcare system remained strong and solid. It even got stronger from here. Our citizens found the medicine they were looking for in hospitals and obtained treatment opportunities. None of this has happened in any developed country, in the United States, in Europe. our citizens who live there, saw the students coming to the complex from Turkey. Fortunately, they were all evacuated. The survival of the health system in this period is a sign of a dynamic economy. A country whose economy is not in good condition cannot have a health system. During this period, the wheels of our industry turned, our industrial production increased by as much as 10 percent. Industrial quarry production in 2021 increased 11.4 annually. During the pandemic, public banks created a strong credit expansion and sustained the industry, the exporter. The small merchants were kept alive with the support provided. The current level of the temporary and bride exchange rate is not a level that reflects macroeconomic conditions in Turkey. We are going to be reasonable here. The course and dynamics of the industry and exports show us this. 2020 was a very difficult year. The state supported our citizens and the economy with all its means. It will be like this in the end. For example, public banks kept our producers, exporters and industrialists alive. We see that the follow-up rates for loans granted by public banks are very low. It also protects the strength of our business, is a solid foundation of Turkey’s economy is dynamic and shows.
FREEDOM IS NOT GIVEN
What message should markets take from the decision?
Turkey is an economy totally open to the outside. Free market boards and institutions function in their entirety and with all their functions. Our Central Bank applies a floating exchange rate regime in a free market economy. The combi regime has full freedom and this is an indispensable state policy. The mandatory provision of the floating exchange rate regime is the fact that the Central Bank does not have a currency target at any level and at any level. All decisions made by political will are to further strengthen this base. All market players will see this to be the case in the coming days. All other speeches are misinformation and speculation.
THE REFORM PROGRAM IS A GREAT TOOL IN THE FIGHT AGAINST INFLATION
What kind of course should we expect in exchange rate policy with the evolution of reforms in the economy in the next period?
The reform program, the timetable and details of which are explained, is a strong program based on production, export, investment and employment. The exchange rate policy has been evident from the beginning. The Central Bank applies a floating exchange rate regime under the uncompromising free market regime, it does not target exchange rates, but targets inflation according to its job description. This objective has also been set by the bank. In keeping with this objective, the Central Bank uses its toolkit without compromise. On the other hand, the objective of reducing inflation and increasing employment with the steps to follow to achieve the economic goals determined by the reform program and political will is indisputable.
The world is in a period of great change. We experienced this during the pandemic. The pandemic has dramatically accelerated economic and political change. The transfer of capital accelerated. The educational system that reveals human capital and human capital is completely renewed. Until now, formal education was the subsidiary of basic distance education. Now distance education has become a subsidiary of basic and formal education. The concept of overtime has changed. Flexible working replaces working in timed physical space. While flexible working is the basic form of work in many areas of the service sector, hourly work in physical space is secondary. This is not only an economic change, but also a radical sociological change. In a society where this change is occurring, very little can now be sustained and measured with the methods of yesteryear. Especially like fast-paced and dynamic Turkey in a society that is multidimensional … Therefore, reforms are much more important in those periods. In fact, a dynamic and responsive state mechanism that renews itself is our most important gain in this regard. I see the presidential system of government as a great achievement in this regard. In this sense, the economic reform program at our disposal is a great tool for us in the fight against inflation and unemployment. Undoubtedly, this program can be deepened according to the development conditions and the conditions-needs.
