Turkish Finance Minister Mehmet Simsek estimated that the effects of the Palestine-Israel conflict on the economy will not be positive and short-term energy supply shortages will lead to high oil prices.
Analyst Alaatin Aktas argues that if the war between Palestine and Israel spreads beyond Gaza, the Turkish economy will suffer a huge blow. Turkey is an energy importing country and pays billions of dollars every year for crude oil and natural gas. Although natural gas is purchased under long-term agreements, increases in crude oil prices directly affect Turkey.
The war in the Middle East will further increase the risk perception towards Turkey and the domestic demand for foreign currency will further increase.
Risk to trade
The Israeli-Palestinian conflict in the region has also made sea and land trade in the eastern Mediterranean precarious. Israel's Haifa port is connected to the world's longest shipping line. It is the port of call for ships passing through and entering the Suez Canal. The inability of ships to reach the port to load and unload could cause both an increase in freight rates and a disruption of the supply chain, which could mean a new external shock.
Simsek in Morocco
Turkey's Finance Minister Mehmet Simsek asked for a credit of at least one year to see results from his new economic program at a meeting he had with World Bank and International Monetary Fund officials in Morocco, which he visited last week.
Simsek noted that Turkey has already achieved significant fiscal consolidation and assured that it will continue the course of rational policy.
The IMF's assessment of the Turkish economy
At the end of September, a team from the International Monetary Fund (IMF) visited Turkey and endorsed the economic measures, but recommended their 'stubborn' continuation.
The IMF recommended that Turkey continue to raise interest rates and taxes and reduce its current account deficit. In addition, he welcomed the decision to allow the Turkish lira to float.
Given that the acceleration of capital inflows to Turkey is closely linked to IMF and credit rating agency ratings, the fact that the government's decisions are aligned with the IMF's rating framework is a positive development.
Free natural gas in Turkey until May 1, 2024
The promises made by the Turkish president to his citizens after the discoveries in the Black Sea have been kept for natural gas and the free supply of 25m3 will continue until May 1, 2024.
Since last April, the state has provided free 25 cubic meters of natural gas to households. In the summer months, millions of households were not billed as their consumption remained below 25 cubic metres, but as winter sets in again households that will be using natural gas for heating will start being billed again for consumption above 25 cubic metres.
As part of the provision of free gas, the state will contribute a total of 43 billion TL to citizens' bills until May 2024. The government continues to subsidize 75% of gas bills and 50% of electricity bills.
Source: RES-EAP