Turkey sees inflation at 28.5% in 2025 with single digits by 2027, programme says

GDP growth seen at 3.3% in 2025.

 Turkey’s medium-term economic programme forecasts inflation to hit 28.5% in 2025 and 16% in 2026, before reaching single digits from 2027, according to a text of the economic roadmap published in the Official Gazette on Sunday.

The programme, which sets the government’s economic roadmap for the next three years, was expected to be announced on Monday by Vice President Cevdet Yilmaz, who said earlier its focus will be disinflation, balanced growth and lasting social prosperity.

“The fundamental objective during the programme is to bring inflation down to the level of single digits and establish price stability,” the government said.

Official data on Wednesday showed Turkey’s annual inflation came in higher than expected in August at nearly 33%.

Since abandoning an unorthodox economic policy championed by President Tayyip Erdogan, pushing for low interest rates despite high inflation, Turkey’s economic leadership has been working to lower inflation, with the central bank starting an easing cycle.

In July, the bank cut its policy rate by 300 basis points, relaunching an easing cycle paused in March due to fluctuations over a widespread legal crackdown on the main opposition which prompted domestic and market turmoil.

Markets were jolted again this week when a court ousted the Istanbul provincial head of the main opposition, dealing a fresh judicial blow to Erdogan’s opponents and triggering sharp falls in Turkish share and bond markets.

The turmoil and August inflation readings are likely to slow the central bank’s plans to cut interest rates as it also weighs stronger economic growth.

The previous medium-term programme from September 2024 aimed for single-digit inflation by 2026, and forecast economic growth at 5% by 2027.

FORECASTS

The programme forecast economic growth at 3.3% in 2025, 3.8% in 2026, reaching 5% in 2028. It said potential gross domestic product (GDP) growth was expected to increase by 0.5% during the programme on the back of structural reforms.

It also anticipated a strong surge in tourism revenues to $75 billion by 2028 from $64 billion this year. Exports were seen climbing to $308.5 billion by 2028 from $273.8 billion this year.

The unemployment rate was seen at 8.5% in 2025 and 8.4% in 2026, the programme showed, while the current account-to-GDP ratio was forecast to be 1.4% in 2025, before reaching 1% in 2028.

The programme also saw current account deficit narrowing to $18.5 billion by 2028, from $22.6 billion this year, while the budget deficit was forecast to widen from 2,208.3 billion lira ($53.55 billion) this year to 2,805.1 billion lira in 2028.

It also said the floating exchange rate regime will continue and that the role of public finance in supporting macroeconomic stability would be increased during the programme’s term.

The lira stood at 41.2650 against the dollar at 2227 GMT, from a close of 41.1950 on Friday.

The programme also listed a series of structural reforms for the next three years, ranging from transitioning into digital or high added-value technology industries to a green transformation and ways to increase agricultural efficiency.

Six reforms were set out for financial and price stability, including measures – some administrative changes and some legal amendments – for creating a strong, institutionalised financial sector, matching prices to inflation, increasing cost savings, and making capital markets more efficient.

© ZAWYA