Turkish economy past ‘the worst’, says Erdoğan business ally

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Turkey has moved past “hyperinflation” and “the worst part” of its economic crisis, one of the country’s most prominent entrepreneurs has said, in a sign of business circles’ confidence that President Recep Tayyip Erdoğan’s shift away from unconventional economic policies will endure.

Erman Ilıcak, the billionaire founder of construction group Rönesans Holding, said he was “very optimistic” about the overhaul implemented by finance minister Mehmet Şimşek, the former Merrill Lynch bond strategist appointed in the wake of Erdoğan’s re-election in May.

“We have been through very difficult times in Turkey,” Ilıcak told the Financial Times. The billionaire, who is an ally of Erdoğan, cited “hyperinflation”, February’s devastating earthquake, and presidential and parliamentary polls.

The country “is really just starting to pick up” and would begin to start “producing more again”, Ilıcak said.

The upbeat comments come as Şimşek has started to reverse many of the policies Erdoğan implemented in the past years. A mixture of high public spending ahead of this year’s election and low interest rates has sent inflation soaring to more than 85 per cent in 2022, fuelled a record current account deficit and drawn foreign capital away.

But investors are sceptical about the latitude the finance minister — and new central bank governor Hafize Gaye Erkan — will have ahead of local elections next year, in which Erdoğan’s Justice and Development party (AKP) seeks to win back control of Istanbul and Ankara.

The central bank has more than doubled interest rates over the past two months, petrol taxes have tripled and the lira has been allowed to sharply depreciate — measures that will cause more short-term pain for consumers and businesses.

Rönesans is among Turkey’s largest construction companies and has developed many big state projects including Erdoğan’s 1,000 room-presidential palace and a high-speed railway project that is under way in southern Turkey.

The group, which generated about €3bn in revenues last year, also has significant operations abroad including deep links with Russia, where Ilıcak made his fortune.

Ilıcak said the recent warming of relations between Turkey and the United Arab Emirates and Saudi Arabia was also “very important” for the business community. The two oil-rich Gulf states committed to making fresh investments in Turkey after Erdoğan travelled there last week. 

“Establishing relations, having peace . . . just aligning our interests always leads to benefits on the economic side,” Ilıcak said. He added that he expected Abu Dhabi’s sovereign wealth fund ADQ would soon “start searching” for Turkish partnerships.

Ilıcak also said he was hopeful about forging alliances with western companies. France’s TotalEnergies said on Friday it would buy a 50 per cent stake in Rönesans’ renewables business Rönesans Enerji. 

Rönesans Enerji has a portfolio of hydro plants with a capacity of 166 megawatts, with several onshore wind projects also under construction. Ilıcak said the group’s focus would be on solar and wind power, especially in the country’s dry and sunny south-east. 

Turkey, which is highly dependent on imported oil and gas to fuel its $900bn economy, has sought in recent years to diversify its energy mix. Renewables accounted for about 42 per cent of total energy output in 2020, but Ankara is hoping to boost that proportion to 55 per cent by 2035, according to its 2022 energy strategy.

Turkey is also developing a large Black Sea gas project and Russia is building the country’s first nuclear power plant.