TÜSIAD Chairman Turan: The Fight Against Inflation Must Include the Public Sector as Well

Forex - TÜSİAD Chairman Orhan Turan stated that the fight against inflation should be continued in a way that includes the public sector. Turan made the opening speech at the TÜSİAD High Advisory Council meeting.

He noted that progress has begun to be made in the fight against inflation as a result of rational monetary policies implemented following recent periods of macroeconomic instability. "However, inflation is still high. Estimates for next year indicate that more time is needed for us to emerge into prosperity," Turan expressed.

He continued, "In this process, the continuation of tight monetary policy and the cooling of the economy is part of the fight against inflation. However, we also see that the sacrifices required in the struggle against inflation have started to strain the resilience of both the real sector and households."

For this reason, he believes that the fight against inflation should be maintained in a way that includes the public sector. Otherwise, a fast and conclusive fight against inflation solely based on monetary policy is both very difficult and places the entire burden on the real sector and households.

He referenced the inflation-fighting program implemented after the 2001 crisis. In that process, fiscal policy was applied in great coordination with monetary policy. Public finances were disciplined, and public expenditures, public deficits, and public debt burden were reduced. At the same time, state enterprises that were used for political gain were privatized, public monopolies were eliminated, and areas under heavy regulation were liberalized. The legislative alignment required by the EU membership process was also accelerated alongside structural reforms. Turkey made significant progress in ensuring the functionality of the free market economy.

As a result of these reforms, Turkey not only reduced inflation but also entered a rapid growth path. Perhaps the most crucial element in the success of this process was the political determination and strong consensus behind it. He believes that the success achieved after the 2001 crisis should inspire the current disinflation process.

Just as then, he emphasizes the necessity of maintaining discipline in fiscal policy now. The budget deficit was around 5% last year and this year. Meeting the budget deficit targets set in the Medium-Term Program will be decisive for establishing macroeconomic balances.

• Combating Informal Economy - Turan stated that strong steps are needed to ensure efficiency in taxation and resource allocation, to enhance fairness, and to combat the informal economy decisively. He remarked, "The fight against the informal economy will not only support the disinflation process but also help in developing the foundations of the market economy and increasing productivity."

The informal economy does not merely mean loss of tax revenue; it intertwines with access to finance issues for firms and social security and workplace safety issues for workers. Informal activities often accompany inefficiency. While the continued operations of inefficient and informal firms may seem to create jobs, they actually disrupt market conditions for new, efficient, and formal firms and ultimately hinder the creation of more jobs.

The informal economy means the use of public resources to sustain the operations of inefficient firms. However, our resources are scarce, and we must use them effectively. The primary aim of public support should be for firms to operate efficiently and competitively.

Therefore, rather than a general and vague discourse on the informal economy, we expect an honest fight to be launched, along with a well-designed action plan to be implemented quickly. This action plan will contribute to improving the public budget balance and will also strengthen the fight against inflation.

In this way, the exhausting debates about regulations that would further increase the tax burden on the “registered taxpayer group,” which bears a significant portion of the tax burden, will come to an end. Moreover, a successful fight against the informal economy will create fair market conditions, improve the conditions for workers, and enhance productivity.

One aspect of combating the informal economy is increasing inspections. Inspections are important not only for fighting the informal economy but also for maintaining social trust, peace, and stability. We have encountered many examples recently demonstrating how crucial it is for the public sector to carry out its inspection duties thoroughly, according to procedure, impartially, and equally for everyone. Perhaps inspections conducted by personnel appointed based on merit could have prevented recent alarming events such as gangs, the crime economy, organized crime in healthcare, food safety issues, illegal immigration, environmental violations, workplace accidents, and irregularities in construction projects.