İstanbul Chamber of Commerce (ITO) President Avdagiç’s statement on interest rates

Chairman of Istanbul Chamber of Commerce (ITO) Sekib Avdagic stated, ‘With the rapid progress to be made in the fight against inflation, we can talk about interest rate cuts even within this year. Indeed, we see that the recent steps taken and the emphasis on determination have led to a significant retreat in market interest rates.’ Avdagic shared his views on the agenda of the business world at the June council meeting of ITO. He emphasized the importance of the deflation process being conducted with great sensitivity and the joint efforts and determination of all sectors. Avdagic said, ‘We have the power to accelerate the deflation process. We want to reach the goal of permanent low inflation as soon as possible. For this, we need two things: total determination in the fight against inflation and rapid improvement of the investment environment. I believe that the strong and determined steps we will take in these two areas will also form the foundations of the new Turkey story we will write.’ Avdagic also mentioned the challenges that tight monetary policy and the continuation of the deflation process may create downward pressure on growth in the future. He highlighted the importance of being cautious against the appreciation of the Turkish Lira due to high interest rates, which may continue to suppress exports and lead to an increase in imports. Avdagic stressed the need for improving financing opportunities for SMEs and reevaluating the cost of KGF-supported loans in line with the declining inflation.
Avdagic expressed that with the decrease in inflation figures surpassing 9% in July and August 2023, we will see a significant improvement in the annual inflation outlook, primarily due to the base effect. Avdagic stated, ‘As frequently mentioned by the economic management, the deflation process is beginning. A significant decrease in inflation will also result in a sharp decline in the general price level, enabling the rapid correction of disrupted pricing behaviors. Thus, the exaggerated pricing behavior created by the market for the future will also be significantly moderated.’ Avdagic highlighted the increasing contribution of the tourism sector to the economy during the summer months, expecting a strong tourism season this year. He pointed out that tourism revenues reaching 8.8 billion dollars in the first quarter, marking a record high for tourism income in the first quarter periods.
Moreover, Avdagic drew attention to the fact that Turkey is gradually becoming a more expensive country compared to our competitors in tourism due to increasing costs. He mentioned that tour operators are directing potential Turkey tours to relatively cheaper countries like Greece, Spain, and Egypt. Avdagic emphasized the importance of addressing a significant risk that could overshadow this strong development in tourism. He stated, ‘Turkey does not deserve to be a cheap holiday destination when considering the rich tourism potential it possesses. However, being an expensive destination requires high prices based on value-added and real income growth, not cost-related expensiveness.’ Avdagic also mentioned the potential risks associated with the ‘carry trade’ opportunity that emerged during this period if it persists for a long time.
Furthermore, Avdagic pointed out the importance of creating a strategy with 70 decision-makers in congress tourism. He mentioned that they have made significant contributions to Turkey’s tourism goals with the Istanbul Convention and Visitors Bureau (ICVB) and stakeholders. Avdagic stated that they have initiated two major research projects as ICVB. The first project is the Istanbul Tourism Index project aimed at examining the behaviors, preferences, and spending areas of foreign visitors to Istanbul in various subcategories such as business, health, and entertainment. The second project focuses directly on congress tourism with the Intellectual Capital Research Project. With this project, they will identify 70 of the most important ‘intellectual capital’ leaders capable of bringing international large-scale meetings to Istanbul and create a strategy. As a result, they believe that with the identification of 70 decision-makers and their multiplier effect, more international congresses will be held in Istanbul every year.