Policy Continuity to Tackle Inflation
Turkish Vice President Cevdet Yılmaz announced on Thursday, January 8, 2026, that Türkiye will steadfastly continue its tight economic policy aimed at combating inflation. Speaking in Istanbul, Yılmaz emphasized that there are 'no plans to pause' the current economic program, which has been in place for over two years. He acknowledged that while programs are dynamic, any adjustments would constitute 'fine-tuning' rather than a change in overall direction.
The primary objective of this sustained tight monetary and fiscal approach is to reduce the country's elevated inflation rate. Türkiye concluded 2025 with an annual inflation rate of 30.89%, a decrease from the previous year. Yılmaz indicated that the government anticipates an improvement in inflation during the first quarter of 2026, which is expected to align market expectations for year-end inflation closer to 23%. Official government forecasts, outlined in the Medium-Term Program (MTP), project inflation to fall within the range of 13-19% by the end of 2026, further declining to 9% in 2027, and reaching 8% by 2028.
Strategic Adjustments for Production and Exports
While the core focus remains on disinflation, Yılmaz highlighted that potential adjustments to the economic program would be strategically directed. These fine-tuning measures are intended to support production, investment, and exports, while simultaneously moderating domestic consumption. The government aims to ease credit conditions for exporters and producers and strengthen mechanisms that selectively support companies, without compromising the broader fight against inflation. This approach seeks to address long-standing current account deficits by boosting output and foreign trade. Türkiye's exports saw a significant rise in 2025, exceeding $270.6 billion, contributing to the balance of payments and strengthening industrial exports.
Economic Context and Outlook
The current economic program was initiated following the 2023 elections, marking a shift from previous unorthodox policies that had led to soaring inflation and a weakened lira. The strategy emphasizes 'controlled disinflation' and maintaining high real interest rates. The Central Bank of the Republic of Türkiye (CBRT) had raised interest rates to 50% in 2024 before easing them to 38% through most of 2025. Vice President Yılmaz clarified that 'real interest rates' are the crucial factor, asserting that rate cuts aligned with falling inflation would not trigger an exit from the Turkish lira.
The Medium-Term Program for 2026-2028 outlines key macroeconomic targets, including a revised GDP growth projection of 3.3% for 2025. The program also forecasts unemployment at 8.5% by the end of 2025, with a gradual easing thereafter. Yılmaz underscored that '2026 is the most critical year of our program,' emphasizing the government's commitment to achieving economic stability and sustainable growth.
5 Comments
Africa
The emphasis on 'controlled disinflation' is understandable given the country's economic history. However, the 'no plans to pause' approach might overlook emerging social costs or unexpected global economic shifts that could require more flexibility.
ZmeeLove
They caused this mess with their 'unorthodox' policies, now we all pay the price.
Muchacho
30% inflation is still way too high! This policy isn't helping fast enough.
Coccinella
The shift away from previous unorthodox policies is a positive step towards economic normalcy and stability. Yet, achieving the ambitious inflation targets of 13-19% in a single year while simultaneously easing credit selectively seems like an incredibly difficult balancing act.
Bella Ciao
It's encouraging to see the government project lower inflation rates for the coming years, offering a glimmer of hope. Still, these projections are often overly optimistic, and the public desperately needs tangible relief much sooner than 2027 or 2028.