Enhancing the Cash Reserves of the Central Bank of Turkey: A Detailed Analysis of Recent Economic Developments

Economic experts point to a significant improvement in the net reserves of the Central Bank of Turkey, excluding swaps, noting the shift from negative to positive. President Recep Tayyip Erdoğan confirmed an increase of $44 billion in the bank's foreign exchange reserves over the past year, bringing the total to over $142 billion.

Economists indicate that the announced figures include the total reserves, not the net figures free from swaps, which are not officially disclosed. However, reaching the "zero point" is considered a positive development, particularly in light of the previously negative net situation.

Following Erdoğan's victory in the May 2023 elections, Turkey underwent radical changes in economic policy under the leadership of his deputy, Cevdet Yılmaz, and the Minister of Treasury and Finance, Mehmet Şimşek. These changes have led to a new approach aimed at reducing inflation and promoting stable economic growth.

Experts expect the Turkish Lira to stabilize in the currency market until fall, with annual inflation expected to decrease starting next month. Şimşek emphasized the success of the new economic program and the progress made towards achieving the desired economic goals.

The Central Bank of Turkey holds reserves for several purposes, including supporting monetary policies and exchange rates, maintaining the necessary foreign currency for debt payments, and increasing confidence in the economy internationally.

Reaching a net reserve "zero point" is seen as a positive indicator for the Turkish Lira and default risk indices. Experts explained that this value shows the bank's assets exceed its liabilities, which boosts confidence in the country's monetary policy.

Reaching a zero net reserve in the Central Bank of Turkey is a positive indicator reflecting the improvement in the bank's economic and financial capacity, which enables more effective control over monetary policy. This improvement, in turn, bolsters confidence in the Turkish economy, serving as a catalyst for decreasing inflation rates.

As inflation begins to decrease, interest rates are expected to follow suit, maintaining a margin of approximately four points between the inflation and interest rates. This gap contributes to the economy's stability and increases its attractiveness for domestic and foreign investments. The decrease in inflation and interest rates is expected to start in the third quarter of this year, paving the way for a period of sustainable economic growth and general improvement in living conditions.

Rising interest rates negatively affect the overall real estate market in Turkey by increasing the cost of mortgage loans, which leads to a decrease in purchasing demand. This decline, in turn, leads to stabilization or a drop in property prices. However, forecasts suggest that as interest rates begin to fall, property prices are expected to rise again.

The current period—still marked by high interest rates—is deemed an ideal time for investment in the Turkish real estate market. Investing now means benefiting from relatively low prices, and with expected interest rate decreases in the near future, investors are anticipated to realize significant gains from the expected increase in property values. Thus, the current time is considered a valuable investment opportunity that could yield significant financial returns as the market begins to recover.

This analysis highlights the pivotal role played by the Central Bank of Turkey in enhancing national economic stability and underscores the importance of transparency in reporting cash reserve figures.