Savings from the government’s new efficiency plan to beat estimates in the fight against inflation, Turkish Vice President Cevdet Yilmaz said he expects in the summer.

Yilmaz, in an interview with Reuters on Thursday, said he expected the Financial Action Task Force (FATF) to remove Turkey from the “grey list” for failing to make sufficient efforts to combat money laundering and financing. of terrorism.

In fact, Yilmaz said that Turkey’s non-upgrade in June would amount to a political decision by the Financial Action Task Force.

Yilmaz, who in the last year has led a dramatic shift toward more orthodox economic policy, predicted that easing prices in the summer would help convince skeptical Turks that inflation is easing after years of rising prices.

To bolster the central bank’s aggressive rate hikes, Yilmaz and Finance Minister Mehmet Simsek unveiled an “austerity and productivity” plan on Monday that focuses on pausing construction of more new government buildings and buying vehicles from public agencies for three years.

While they did not specify the exact amount of savings in the budget, some analysts say it could amount to around 100 billion Turkish lira ($3.1 billion).

“It looks like it will be well above that,” Yilmaz said of that estimate, speaking in his office at the Presidential Palace in Ankara.

“We believe we will experience a serious drop in inflation especially in the summer season this year,” he said.

“Improvements in some matters that affect daily life will positively affect the perception of our citizens” and will “create a different psychology in terms of inflation expectations.”

Inflation hit 70% last month – the highest in emerging markets except Argentina – and is expected to peak in May at around 75%, after which the central bank expects to fall to 38% by the end of the year.

Many Turks remain skeptical that price easing will come after years of reduced savings. Annual inflation expectations were close to 120% last month and 95% by the end of 2024, according to the Turkey Household Inflation Survey by Koc University and Konda Research.

Political uncertainty

A longtime member of the ruling AKP Party (AKP), Yilmaz was appointed in June last year to help reverse years of unorthodox policy under Erdogan, who had previously called for interest rate cuts to reduce inflation.

Loose monetary policy has triggered a series of currency crashes and sent inflation skyrocketing, an economic crisis that is weighing on the president’s popularity.

But since Erdogan was re-elected in May last year, Ankara has eased regulations to free up financial markets and sought to stimulate the emerging market economy. The central bank raised interest rates to 50%, up from 8.5% last June.

Yilmaz told Reuters that last year’s election removed any “political uncertainty” about Erdogan’s determination to reduce inflation.

“He states that he stands behind the economic program and that he supports it at every opportunity… I think there is no doubt about that,” Yilmaz said.

He added that he is confident the central bank will meet its inflation target even if there are no dramatic changes at the end of the year.

Analysts said the austerity and productivity plan would help contain spending but that more cuts, perhaps to public sector wages or pensions, were needed to meet the inflation target.