The interview was Yildirim’s first since an April 16 referendum, which was preceded by massive government-backed stimulus for lending after the nation’s slowest growth rate since a contraction in 2009. The referendum, backed by Yildirim, hands President Recep Tayyip Erdogan enhanced executive authority and by 2019, will lead to the abolishing of Yildirim’s current job, according to Bloomberg.
“We’ll continue to take such measures,” Yildirim said of the economic stimulus program, speaking in a ballroom at the Cankaya Palace. “The revival of the domestic economy will increase even more.”
Investors have so far welcomed the outcome of the referendum, even as questions remain about how Erdogan will use his enhanced powers to revive growth, bring inflation under control and support the currency, which has lost almost a quarter of its value against the dollar in the past year. The benchmark Turkish stock gauge closed at a record high on Monday, while the lira has appreciated 1.8 percent against the greenback since the vote.
Infrastructure Spending
A former transportation minister, Yildirim’s attention focused largely on infrastructure investment. Turkey plans to spur spending of about 100 billion liras ($28 billion) in rail projects over the next 10 years, as well as pouring money into new highways, hospital developments, airports, shipping, student dorm facilities, electric energy and urban regeneration.
“This is why Turkey’s economy tripled in size and exports quadrupled” since the ruling AK Party came to power in 2002, he said. “While the world was running from crisis to crisis, Turkey carried out some of the largest projects in the world.”
Urban regeneration, which includes destroying and rebuilding structures that are insufficiently earthquake-proof, will help to drive domestic consumption and employment over the next decades, he said. Many of those projects will be moved off the government budget through partnerships with the private sector, he said.
“Large projects can’t be done out of the state’s general budget because first you’re going to do your spending on people’s health, education and defense,” he said. “If there’s money left over, you’ll do big infrastructure projects.” Because in the past that wasn’t possible, Turkey turned to public-private partnerships and build-operate-transfer models, and plans to continue investing in that way, he said.
Interest Rates
The government maintains its commitment to lowering borrowing costs -- as well as its unorthodox view that higher interest rates cause inflation -- and is finding creative ways to reduce financing costs without interfering with the central bank, he said. The newly established Turkey Wealth Fund, whose strategic plan has not yet been revealed, will also be used for that purpose, he said.
“The Wealth Fund is a structure that is aimed at lowering the interest rate burden in financial transactions mainly in areas of investment as well as providing added value to the country,” he said. The fund could take over financing for existing projects from banks and offering investors lower rates, he said. “That way the banks can use the resources they have for new projects, and this is a serious possibility,” he said.
Yildirim said the government has no plans to call for early elections to allow a full switch to the presidential system to happen earlier than the current Nov. 2019 timeframe. Investors shouldn’t be confused by competing messages on economic policy coming from the cabinet and from some of Erdogan’s economic advisers, he said.
“The advisers can say whatever they want, but the responsibility is with us,” he said.