Treasury and Finance Minister Mehmet Şimşek warned on Saturday about negative risks originating from rising protectionism on global trade, issuing a stark warning how if this trend continues we could witness declines in global gross domestic product (GDP).
Speaking at the panel titled “Addressing Global Economic Uncertainty: Strategies for Resilience” during this year’s TRT World Forum, the minister drew attention to the issue of trade fragmentation and other major global challenges.
“Trade fragmentation is no longer a theoretical risk, it’s a reality. Protectionism is now the new normal,” he said.
“High global indebtedness at the time when long-term interest rates are high is a real risk,” he added.
Moreover he pointed out that aging world population is another “structural headwind” for growth. He also cited effects of rising geopolitical tensions and conflicts, in addition to transformative risks such as rise of frontier technologies like AI and the climate crisis.
‘Geostrategic competition’
Detailing the trade fragmentation, the minister noted the root cause is to do with “geostrategic competition” between the U.S. and China as he reported of trade restrictions in the past two years, noting it is possible to see “a lot of concentration” in both countries.
He also highlighted the growing number of “new trade restrictions,” recalling that protectionism has risen following the global financial crisis but that in recent years this has been even more evident.
He said if this was to continue it could trim global GDP growth by as much as 7%.
Şimşek also touched upon “friendshoring” as a growing trend, while he explained the measures to be taken and evaluated the potential risks under presidency of Donald Trump in the United States.
He forecasted the risk is that “there would be more tariffs,” not only of China but also against other countries, based on the pre-elections rhetorics.
“If that is the case, there might actually be higher inflation in the U.S. but also higher longer-term interest rates in the U.S.,” noting this is a “bad news” for emerging economies, essentially everyone.
He also cited as further risks to be China rerouting their exports to other markets and that would also mean slower growth in China and ultimately slower global growth.
‘Likely to be resilient’
In face of this risks, the minister said Türkiye was “likely to be resilient” to the current climate, noting the country has 54 free trade agreements (FTAs), including a customs union agreement with the EU, which covers 62% of total exports.
He also noted Türkiye was currently negotiating comprehensive FTAs with Gulf Cooperation Council (GCC) countries and other countries, adding that hopefully in the next few years about three quarters of the exports would be covered by the rule-based free trade agreements.
“If that is the case, its highly likely that Türkiye will be a lot more resilient than other relative open economies,” he said.
The minister noted Türkiye, technically looking could benefit from both nearshoring and possibly friendshoring citing ties with Central Asia, Middle East, Balkans, EU and North Africa and Africa in general.
Şimşek also underscored the focus on enhancing regional integration and connectivity citing the example of new Development Road project.
Moving onto question of high debt, he said global debt has been rising, adding that Türkiye’s overall debt, including public, private sectors, household, companies is lower compared to advanced and developing countries.
“Türkiye’s debt to GDP ratio is 99% including all forms of debt while emerging market average is 245%,” he said.
The minister also drew attention to Türkiye’s untapped demographic potential, adding that considering ageing global population Türkiye was in “relatively good shape.”
He also highlighted Türkiye’s diplomatic footprint and defense industry capabilities.
The minister also touched upon growth outlook and structural reform agenda, noting it is a “comprehensive agenda” and they continue to take steps.
He underscored importance of boosting productivity and enhancing competitiveness, saying it is how you can create “sustained prosperity.”
