In a significant departure from President Tayyip Erdoğan’s pledge in December 2022, the Turkish economy faces a steep uphill battle to curb soaring inflation rates as per the latest Medium-Term Program (OVP) unveiled today. The outlook is grim as the Turkish lira weakens, with the dollar now pegged at a staggering 47.8 Turkish Lira.
Deputy President Cevdet Yılmaz, responsible for announcing the OVP predictions, painted a somber picture for the nation’s economic future. In a press conference earlier today, Yılmaz stated, “We will not compromise on fostering growth and employment. Our primary objective is to achieve single-digit inflation and secure financial stability. The Central Bank, operating within the framework of its independence, is committed to playing its part.”
The OVP, which sets out four key objectives, including addressing disaster recovery, ensuring macroeconomic stability, reducing inflation to single digits, fostering growth and employment, and promoting social justice, introduces three main policy tools. These tools comprise the maintenance of fiscal discipline (excluding earthquake-related expenditures), monetary policy adjustments, and structural reforms. While tangible results from these reforms are expected in the medium term, short-term expectations are aimed at improvements. The Central Bank is poised to act within the bounds of instrument independence.
Projections for 2023 include a per capita income estimate of $12,415, with a medium-term goal to reduce unemployment to single digits, forecasting 4.4% for 2023, 4% for 2024, 4.5% for 2025, and 5% for 2026.
Yılmaz also unveiled a year-end inflation projection of 65%, signaling the hope of achieving single-digit inflation figures by 2026, as per the data presented.
The decisions within the OVP announced by President Erdoğan have now been officially published in the Official Gazette, indicating that “The ‘Medium-Term Program (2024-2026)’ prepared by the Ministry of Treasury and Finance and the Strategy and Budget Directorate has been approved in accordance with Article 16 of Law No. 5018 on Public Financial Management and Control.”
Key Predictions and Targets from the OVP:
- Economic Growth:
- 2023: 4.4%
- 2024: 4%
- 2025: 4.5%
- 2026: 5%
- Unemployment Rate:
- 2023: 10.1%
- 2024: 10.3%
- 2025: 9.9%
- 2026: 9.3%
- Inflation Forecast:
- 2023: 65%
- 2024: 33%
- 2025: 15.2%
- 2026: 8.5%
- Budget Deficit:
- 2023: $1.6 trillion Turkish Lira
- 2024: $2.65 trillion Turkish Lira
- 2025: $1.82 trillion Turkish Lira
- 2026: $1.82 trillion Turkish Lira
- Budget Balance/GDP:
- 2023: -6.4%
- 2024: -6.4%
- 2025: -3.4%
- 2026: -2.9%
- Gross National Income:
- 2023: $1.06 trillion
- 2024: $1.1 trillion
- 2025: $1.2 trillion
- 2026: $1.3 trillion
- Per Capita Income Target:
- 2023: $12,415
- 2024: $12,875
- 2025: $13,717
- 2026: $14,855
- Current Account Deficit:
- 2023: $42.5 billion
- 2024: $34.7 billion
- 2025: $31.7 billion
- 2026: $30 billion
- Current Balance/GDP:
- 2023: -4%
- 2024: -3.1%
- 2025: -2.6%
- 2026: -2.3%
- Dollar/TL Forecast:
- 2023: 23.9
- 2024: 36.8
- 2025: 43.9
- 2026: 47.8
- Exports:
- 2023: $255 billion
- 2024: $267 billion
- 2025: $283.6 billion
- 2026: $302.2 billion
- Imports:
- 2023: $367 billion
- 2024: $372.8 billion
- 2025: $388.9 billion
- 2026: $414 billion
- Tourism Revenue:
- 2023: $55.6 billion
- 2024: $59.6 billion
- 2025: $64.7 billion
- 2026: $71.3 billion
