Market News
Turkey forecasts 28.5% inflation this year, single digits by 2027 - REUTERS
Summary
- Annual medium-term programme is roadmap for economy
- GDP growth forecast at 3.3% in 2025, 5% in 2028
- VP Yilmaz expects disinflation to carry on this year
- Last year, Turkey forecast single-digit CPI by 2026
- Yilmaz: FX interventions rare, address extreme moves
ANKARA, Sept 8 (Reuters) - Turkey's government expects inflation to slow to 28.5% this year and to 16% in 2026 before dropping to single digits the following year - about a year later than previously predicted, according to an economic roadmap announced on Monday.
In its annual medium-term economic programme, which covers the next three years, the government also forecasts economic growth would slow to 3.3% this year as tight monetary policy weighs, before it rebounds and returns to around trend growth of 5% in 2028.
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Vice President Cevdet Yilmaz, presenting the programme in Ankara, said disinflation will continue through year end, supported by fiscal policies and the moderate course of commodity prices.
Authorities intervene at times to smooth "extreme" moves in the foreign-exchange rate, Yilmaz said, but added that Turkey has a floating FX regime and no target for the lira currency.
The lira slipped to 41.2650 against the dollar on Monday, on track for another record low close after a year in which it has depreciated slowly but steadily.
The inflation forecast marked a retreat from last year's medium-term programme in which the government predicted single-digit consumer price inflation by 2026, not 2027.
Last month, annual inflation was higher than expected at nearly 33%. That, combined with unexpectedly high GDP growth in the second quarter, prompted analysts to predict the central bank will slow its rate cuts to only 200 basis points this week.
RECOVERY AFTER CRISIS
The major emerging market economy is slowly coming out of a protracted economic crisis that sent inflation soaring and the lira plunging since 2018, due largely to unorthodox low interest-rate policies championed by President Tayyip Erdogan.
Since mid-2023, a new cabinet and central bank leadership have reversed course with tight monetary policy - including a policy rate raised as high as 50% - meant to rein in inflation that had soared as high as 85%.
In July, the central bank cut rates by 300 basis points to 43%, relaunching an easing cycle it had paused in March due to market turmoil over a widespread legal crackdown on the main opposition party.
Markets were jolted again last week when a court ousted the party's Istanbul provincial head, dealing another judicial blow to Erdogan's opponents and triggering falls in shares and bonds. Finance Minister Mehmet Simsek, also presenting the programme, said there were no "extraordinary" market moves in the last week and that it was not possible to isolate the potential economic impact of any domestic political issues.
FORECASTS
The programme, released around midnight in the Official Gazette, forecast economic growth of 3.3% in 2025, 3.8% in 2026 and 5% in 2028, and added that potential GDP growth was expected to rise by 0.5% during this time due to structural reforms.
Tourism revenues were expected to rise 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.
