Hakan Aran: Worst period for inflation in Turkey is over

Tuesday, 05 March 2024 13:10:58 (GMT+3)   |   Istanbul
       

At the Eurometal Steel Day & YISAD Flat Steel Conference, held at Istanbul Marriott Hotel Asia on Tuesday, March 5, in cooperation with SteelOrbis, Hakan Aran, general manager of of Turkish bank İş Bankası shared with the participants his evualation of the effects of global inflation on the Turkish economy and his recommendations for the steel industry and possible solutions.

Mr. Aran started his speech by saying that economic plans were completely disrupted by the Russia-Ukraine war in 2022 and the February 6 earthquakes in Turkey in 2023, and he said that he wished that this year, which is the 100th anniversary of İşbank, would be a more comfortable year for the market. Stating that one of the main reasons for global inflation is the way the 2008 crisis was resolved, Mr. Aran underlined that issuing too much money into the market as a way out of this crisis and then resorting to monetary expansion, and also given the impact of the pandemic, led to global inflation. He stated that Turkey lost control of inflation by twice being "stubborn" about its economic policy. Aran said that they expect the next two years to be economically difficult after 2023 when inflation was on the agenda as the first problem. “The global economic congestion will continue for the next two years. However, do not be pessimistic about the 4.5 percent monthly and 67 percent annual inflation announced yesterday. The worst period is over. The period between May 31, 2023, and May 31, 2024 will be remembered as the historically worst period in Turkey in terms of inflation, impacted by the general elections in May 2023. We think that we will close this year with annual inflation of 40-45 percent. The tight monetary policy implemented will be further strengthened by the decisions to be taken in fiscal policy in April, and this will contribute to the achievement of medium-term inflation targets. In this regard, we estimate that annual inflation will decrease to 22-25 percent by the end of 2025, and again to 10 percent by the end of 2026," Aran said.

Sharing his evaluations and suggested solution for the steel industry, Aran stated that China turned to exports as a result of the contraction in domestic demand, affecting the export sales of all other countries, and surpassing Turkey in the European market. He underlined that Turkey's steel exports decreased and its imports increased in 2023, and that production lagged behind consumption in both the flat and long product segments for the first time since 2012. Stating that he expects this situation to be reversed in 2024 and 2025, Mr. Aran said, “In this difficult period, it is important to focus on projects related to energy and labor efficiency and to see this congestion as an investment opportunity. The smartest thing for the Turkish steel industry to do would be to combine energy efficiency with green transformation and implement the requirements of the carbon border adjustment mechanism that will start in 2026, thus not being affected by a possible tax on exports and being able to participate in competition while demand is recovering," he said. At this point, the İş Bankası official said that his bank has created an investment loan with its own resources to ensure that production and investments in Turkey do not stop and to prevent exports from decreasing. In this context, he stated that investors can obtain a loan of TRY 100-800 million from the bank with a two-year grace period, a 10-year maturity period, 20 percent of which will be financed from the equity capital of the buyer and 80 percent of which will be financed by the bank, at 35 percent interest. Aran underlined that, in this way, the next two years can be well utilized in terms of investments.


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