Istanbul- After the “Covid-19” pandemic that shook the world – and the Ukrainian-Russian war; Trade has entered into a major crisis all over the world, which is why the ministries of economy and trade of countries have become of great importance.
Turkey, which is located in the most strategic place for supply chains during the pandemic, was greatly affected by this crisis, and once again; During the Ukrainian-Russian War, Turkey had strong trade relations with both countries.
On top of the two serious crises, the Israeli war on Gaza was added.
Turkey, which has not been able to completely overcome its economic fragility, is one of the countries most affected by these crises, and because the Ministry of Commerce is one of the most important ministries in this environment; Dr. Omar Polat was appointed Minister after the 2023 elections, as he knows the market well through his work in the private sector for 41 years.
In this interview, which was exclusively conducted by Al Jazeera Net, the minister discussed the extent to which Turkey and Arab geography were affected by the crisis, especially after Israel’s war on Gaza, and how their future will be shaped, and what if the conflict spreads to Iran and oil prices rise.
And to the dialogue…
Israel’s war on Gaza continues as a great drama on the humanitarian side, but nonetheless; There is also an economic dimension. How was trade in the region affected by the war at this time?
The second month of the Israeli-Palestinian conflict has passed; The human tragedy in Gaza creates new pain every day before the eyes of the world. Of course, the events taking place in the region also have economic dimensions. As the global and regional economy; What was under the influence of events such as the Covid-19 pandemic, the trade wars between the United States and China, and the Russian-Ukrainian war in recent years, is now affected by the Israeli-Palestinian conflict.
According to forecasts prepared by international organizations, if the conflict is limited to Israel and Palestine, its impact on oil prices will be minimal. However, if it develops and turns into a regional war involving oil-producing countries such as Iran, the price of a barrel may rise above the current level of $76.5, and this will certainly have negative effects on the global and regional economy, which is currently going through an inflationary period and is in a fragile state.
In light of the ongoing conflict between Israel and Palestine; The safety of the new economic corridor has become a topic of debate
Do you think war will change many things?
Yes; For example, transportation corridors. As you know; One of the results of the G20 summit held in India in recent months was the announcement of a new economic corridor and the signing of a memorandum of understanding to create a railway and port network that will connect India to the Middle East, Africa and the Middle East to Europe.
Although Israel is not one of the countries that signed the memorandum of understanding within the scope of the project, the Israeli port of Haifa is one of the most important crossing points in the corridor. In light of the ongoing conflict between Israel and Palestine; The safety of the economic corridor has become a topic of debate. The development road, which will start from the port of Basra in Iraq and extend north to Ovaköy on the Turkish border, and then to Europe via Turkey, is a good alternative.
Do you think that the war will negatively affect global trade?
The International Monetary Fund has expressed its opinion, saying that the impact of the Israeli-Palestinian conflicts on the regional and global economy will be high and negative, at a time when growth is slowing, interest rates are rising, and the cost of servicing debt is increasing due to “Covid-19” and the war.. I have the same point of view.
Are you, as a ministry, also considering boycotting or imposing sanctions on Israel or the companies that support it?
Existing trade with Israel extends to companies including international companies, and the next destinations of ships arriving at our country’s ports for products subject to transit trade to Israel also fall within this framework.
Our country recognizes the sanctions that fall within the scope of the United Nations. In this context, we are trying to lead all decisions that will be taken at the United Nations against Israel regarding Israeli terrorist attacks.
Türkiye expresses its full support for the just cause of Palestine. This support transcends politics, and it continues. It has never been possible for Turkey to leave Palestine alone, and it will not happen from now on.
Words are no longer sufficient to describe what has happened in the Palestinian territories since October 7th. Our Palestinian brothers and sisters face unprecedented oppression in history every day.
I strongly condemn this massacre, which specifically targets innocent civilians, women and children, and I remember with compassion our Palestinian brothers who lost their lives in the attacks, and I wish a speedy recovery for the wounded.
We are trying to lead all the decisions that will be taken in the United Nations against Israel regarding Israeli terrorist attacks
How will trade relations between Israel and the countries of the region be shaped in the future after this horrific war?
The Islamic world, which is trying to support the Palestinian people, is trying to distance Israel from the resources that will finance the war, especially by boycotting Israeli products.
We expect that as such class actions continue; The volume of Israel’s trade with the countries of the Islamic region – in terms of exports and imports – will decrease relatively in the medium and long term.. But after the war is over, I believe that if the long-awaited two-state solution can be achieved, peace, prosperity and development in the region will return.
You and President Erdogan have made repeated visits to the Gulf countries and the region. What kind of trade plan will Türkiye undertake with regional countries?
Under the leadership of President Recep Tayyip Erdogan, Turkey is pursuing a strategy aimed at establishing strong trade relations with the Gulf countries and the region and consolidating existing relations. In this regard, and in parallel with the intense diplomatic movement of our President, various visits and contacts were made in order to evaluate the opportunities available in the field of trade and increase opportunities for cooperation and protection. Turkey’s economic interests.
Our trade plan is to increase mutual gains by establishing strong and fair trade relations with countries in the region, by taking various steps on issues such as cooperation agreements with Gulf countries, facilitating trade and improving the investment environment.
In this context; The Comprehensive Economic Partnership Agreement (KEOA) that Turkey signed with the United Arab Emirates entered into force on September 1, 2023, and the Country Trade and Economic Partnership Agreement (TEOA) will also enter into force once internal approval processes are completed; These agreements are of great importance for the development of our trade.
We expect that as such class actions continue; The volume of Israel’s trade with the countries of the Islamic region will decrease relatively in the medium and long term
You have just returned from visiting the Gulf countries, will you start an alternative business process?
We attach great importance to Islamic geography, including the Gulf countries.
All major countries that have weight in the regional economy aim to diversify their economies through development visions, so Qatar National Vision 2030, Saudi Vision 2030, Abu Dhabi Vision 2030, Bahrain Economic Vision 2030, Kuwait Vision 2035, and Oman Vision 2040 contain opportunities. Important for Turkish companies, we are making great efforts to include Turkish companies in these development plans, which include large-scale projects.
We are implementing the “Export Development Strategy with Islamic Countries” in order to develop and diversify our exports with Islamic countries.”
The share of countries falling within the scope of the aforementioned strategy currently amounts to 26% of our exports, and we aim to increase this share to 30% by 2028.
Recently, we visited the UAE, Saudi Arabia, and Qatar, and signed memorandums of understanding with the Kingdom of Saudi Arabia in the fields of defence, energy, communications, and increasing direct investments.
We signed a “comprehensive economic partnership agreement” with the UAE, and this agreement entered into force as of September 1. We agreed to strengthen mutual economic and trade relations with Qatar, and we aim for the volume of bilateral trade to reach $5 billion in the medium term.
In addition, we signed a declaration to begin preferential trade agreement negotiations with Algeria. During our visit to Kuwait at the beginning of November, we agreed to accelerate our efforts to diversify and consolidate our trade, and in our visit to Egypt, we made important decisions to enrich our bilateral trade and strengthen our investment partnership.
We also organized more than 60 trade delegations under the coordination of our Ministry to promote our export products in countries falling within the scope of the export development strategy with Islamic countries, and we supported participation in more than 400 exhibitions. In short, we are working hard on this issue.
We are implementing the “Export Development Strategy with Islamic Countries” in order to develop and diversify our exports with them
Let’s talk a little about Turkey’s trade. Do you think the depreciation of the Turkish lira will end soon?
First of all, I do not think it is correct to define the devaluation of the Turkish lira as a crisis. We are closely following exchange rate developments in terms of price stability, financial stability and external balance, and the path of the Turkish lira has become more stable., Especially recently, the balance we see in the real exchange rate indicates the opposite of the description of the crisis.
The effects of the steps taken by the Turkish Central Bank to ensure price stability and financial stability have begun to appear, as we notice a slowdown in domestic demand for foreign currencies, and there is a decrease in the rate of increase in inflation.
We also notice balance in foreign trade, and our country’s foreign exchange revenues are increasing with the increase in exports. Our total foreign exchange reserves have increased from $111.6 billion in July to $140.1 billion according to the latest data. We note the stability of the exchange rate due to the impact of the flow of… foreign currency.
So what are the government’s expectations for inflation levels?
Within the medium-term program; The annual rate of increase in the CPI is expected to reach 65% at the end of the year, and there has been a recovery in the core inflation trend and more recently, when temporary factors are excluded, I believe this trend will continue.
In combating price increases during the coming period, we aim to reduce inflation to 33% in 2024.
As a continuation of the fight against inflation, we aim to reduce the annual increase in the CPI to single digits by 15.2% in 2025, and 8.5% by the end of 2026.
In this context; We are taking and will continue to take all necessary steps to ensure that the Turkish lira has a stable appearance, enhance supply capacity and eliminate factors that cause inflationary stagnation.
I think it is right to define the depreciation of the Turkish Lira as a crisis. We are closely following exchange rate developments and the course of the Turkish Lira has become more stable.
The country’s foreign exchange reserves have witnessed a rapid increase in recent years. What are the reasons for this and expectations about it?
Total foreign exchange reserves have increased from $111.6 billion in July, to $140.1 billion according to the latest data, and the most important reason for this is the economic policies implemented by our new government in a comprehensive manner and the elimination of election uncertainty.
We have fully made clear what we aim to achieve and what we will do with these policies, both in the medium-term program and in the development plan.
These policies are having a positive impact on our reserves, rating and CDS premiums, and I would note that it is beginning to impact several macroeconomic indicators.
For example; There is an improvement in foreign trade and the balance of payments, and a positive trend in the composition of growth, and we are fully confident that our overall indicators will improve as a result of all the steps taken to ensure the continuity of the strong employment situation, exchange rate stability, and low inflation. Therefore, I believe that the increase in reserves will continue during the coming period.
Although we believe that our country deserves a higher credit rating, we welcome Standard & Poor’s move
What does it mean that Standard & Poor’s changed Turkey’s outlook to positive? Do you expect the country’s credit rating to be updated soon?
We are beginning to reap the benefits of our government’s recent steps, and I would first like to emphasize the significant improvement in our country’s risk premium, despite the severity of global financial conditions and increased geopolitical risks.
Turkey’s credit risk premium fell below 350 basis points for the first time in nearly 3 years, falling to the level of 330.
in addition to; The international credit rating agency Standard & Poor’s reviewed and raised our country’s credit rating outlook from “stable” to “positive,” and it must be emphasized here that this step was off the calendar. AndAlthough we believe our country deserves a higher credit rating, we welcome this step.
This situation will positively impact foreign financing opportunities for our banks. Syndicated loan renewals in the last quarter of the year were at high levels, and we see that Eurobond issuances have also picked up.
