Turkey’s Economy: Single-Digit Inflation Now Projected for 2028

Turkey’s Medium-Term Program (MTP) for 2026–2028 has been unveiled, outlining the government’s economic roadmap. The most striking change is the postponement of the single-digit inflation target, now delayed to 2028. The plan emphasizes tighter fiscal discipline, with revenues expected to grow faster than expenditures and with a focus on reducing interest burdens.

Shift in Inflation Timeline

Earlier programs suggested that Turkey would reach single-digit inflation in 2026, but the new plan pushes that target two years forward. According to the updated outlook, the economy will continue its disinflation process, but the pace has slowed. By the end of 2025, Turkey’s GDP forecast was revised up to $1.569 trillion, while inflation projections were cut to 3.3%. At the same time, the year-end consumer inflation rate (CPI) was revised up to 28.5%.

Budget Tightening and Fiscal Priorities

The new MTP sets stricter budget rules compared with previous years. Interest expenditures, particularly domestic debt servicing, are expected to be brought under control through primary surplus targets. For 2026, revenues are projected at 16.2 trillion TL against expenditures of 18.9 trillion TL, with tax revenues expected to reach 13.7 trillion TL. Primary surpluses of 29 billion TL in 2026, 301 billion TL in 2027, and 541 billion TL in 2028 are targeted, while a program-defined surplus is expected by 2028.

Privatization income also stands out after years of silence. Revenues of 185 billion TL in 2026 and 70 billion TL in 2027 are projected, possibly linked to telecom and aviation assets.

Growth, Income and Global Position

The program foresees GDP growth of 3.8% in 2026, 4.3% in 2027, and 5% in 2028. Per capita income is expected to rise from $18,621 in 2026 to $20,987 in 2028, moving Turkey into the high-income group according to World Bank classifications.

Structural Reforms and Supply-Side Policies

The government is prioritizing supply-side measures to support growth and disinflation. These include expanding social housing, boosting agricultural production, and directing resources toward labor-intensive and high-tech industries with export capacity. Policies also highlight green transformation, digitalization, semiconductor production, defense and aerospace, and R&D in artificial intelligence, cybersecurity, and nuclear technology. The program also points to logistics, 5G technologies, and labor market flexibility through remote and project-based work arrangements.

Disinflation process will continue

Vice President Cevdet Yılmaz underlined that the disinflation process will continue despite delays, stressing that low inflation creates a more predictable environment for investment and sustainable growth. He highlighted that Turkey’s GDP per capita has already surpassed $17,000 in 2025, supported by improved reserves and falling risk premiums.

Finance Minister Mehmet Şimşek pointed out that rising interest costs are linked to post-earthquake financing needs, not fiscal irresponsibility. He reiterated that disinflation and price stability remain the government’s top priorities, with inflation already trending down from 65% toward 30% and expected to fall below 20% next year. Şimşek also emphasized fiscal discipline, noting significant cuts in public spending and a stronger commitment to achieving primary surpluses over the next three years.

(ekonomim.com)

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