Türkiye’s government on Monday presented its closely watched new three-year economic road map that officials say aims to restore fiscal discipline, bring inflation down to single digits and accelerate structural reforms.

The updated medium-term program (MTP) revised down growth projections and raised near-term inflation estimates, but despite the adjustments, officials emphasized that it remains focused on disinflation.

The new economic blueprint expects inflation to slow to 28.5% this year and to 16% in 2026 before dropping to single digits the following year.

The government also forecasts economic growth to slow to 3.3% this year, down from the earlier 4% projection, as tight monetary policy weighs, before it rebounds and returns to around trend growth in 2028.

Vice President Cevdet Yılmaz, presenting the program in Ankara, said the decline in inflation reflected the impact of “tight fiscal and monetary policies,” stressing that disinflation will continue through the end of the year.

“There will be no concessions from our commitment to achieve a lasting reduction in inflation,” Yılmaz said, adding that a moderate course of commodity prices is also helping the process and supporting the current account balance.

Authorities intervene at times to smooth “extreme” moves in the foreign exchange rate, he said, but added that Türkiye has a floating FX regime and no target for the Turkish lira.

Rebalancing economy

The inflation forecast marked a retreat from last year’s medium-term program in which the government predicted single-digit consumer price inflation by 2026.

Official data last week showed the annual trend in inflation remains downward, although the CPI softened less than expected to 32.95% in August, while it rose 2.04% on a monthly basis.

That, combined with unexpectedly high gross domestic product (GDP) growth in the second quarter, prompted analysts to predict the Central Bank of the Republic of Türkiye (CBRT) will slow its rate cuts to only 200 basis points this week.

The major emerging market economy is slowly rebalancing after years of soaring inflation and high volatility in the foreign exchange rate.

Since mid-2023, a new Cabinet and central bank leadership shifted course to more conventional policymaking with tight monetary policy, including a policy rate raised as high as 50%, meant to rein in inflation, which has more than halved over the last year.

In July, the CBRT cut rates by 300 basis points to 43%, relaunching an easing cycle it had paused in March due to market turbulence after the detention of Istanbul Mayor Ekrem Imamoğlu, who was jailed pending trial over graft charges.

Markets were volatile again last week after a court ruling to suspend Istanbul provincial leadership of the main opposition Republican People’s Party (CHP) over alleged irregularities in a 2023 provincial congress.

Treasury and Finance Minister Mehmet Şimşek, also presenting the program, 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 primary objective of the MTP is to strengthen macroeconomic and financial stability, preserve fiscal discipline and achieve single-digit inflation over the medium term to ensure lasting price stability.

According to the program, released around midnight in the Official Gazette, the role of public finance in supporting macroeconomic stability will also be enhanced during the implementation period.

The program forecast economic growth of 3.3% in 2025, 3.8% in 2026, 4.3% in 2027 and 5% in 2028. Potential GDP expansion is expected to rise by 0.5% during this time due to structural reforms.

Inflation is expected to be 28.5% by the end of this year, 16% in 2026, 9% in 2027 and 8% in 2028.

The current account-to-GDP ratio is forecast to be 1.4% in 2025, 1.3% in 2026 and 1.2% in 2027, before reaching 1% in 2028. The current account deficit is seen narrowing to $18.5 billion by 2028, from $22.6 billion this year.

The budget deficit is projected to be 3.6% of the country’s GDP this year, before narrowing to 3.5% in 2026, 3.1% in 2027 and 2.8% at the end of the program period.

In absolute terms, the gap is forecast at TL 2.21 trillion ($53.55 billion) in 2024, before rising to TL 2.71 trillion in 2026, TL 2.74 trillion in 2027 and TL 2.81 trillion in 2028.

The program also projects a shift to a primary surplus next year, with the primary balance expected to reach TL 500 billion by 2028.

Spending controls

Yılmaz highlighted that around $90 billion had already been spent on expenditures related to the rebuilding after the devastating Feb. 6, 2023, earthquakes, warning that their fiscal impact would continue, albeit with a diminishing effect over time.

Şimşek reiterated the government’s commitment to fiscal restraint, noting that spending controls were yielding results.

“We are determined on public savings,” he said, underlining the central role of fiscal discipline in the program.

Tourism revenues were expected to rise to $75 billion by 2028 from a record $64 billion this year.

Exports are seen climbing to $308.5 billion by 2028 from what is expected to be a new peak of $273.8 billion this year. They are forecast to reach $282 billion in 2026 and $294 billion in 2027.

Imports are projected to reach $367 billion by the end of this year, $378 billion in 2026, $393 billion in 2027 and $410.5 billion in 2028.

2.5M new jobs

The unemployment rate is expected to be relatively stable at 8.5% this year, with a target of 8.4% for next year, 8.2% for 2027, and 7.8% for 2028.

Yılmaz said the program envisages the creation of around 2.5 million new jobs, with policies designed to increase labor force participation and improve social welfare.

For the first time, the MTP also includes specific policy measures targeting underutilized labor.

The program also listed a series of planned structural reforms ranging from transitioning into digital or high-value-added technology industries to a green transformation and ways to increase agricultural efficiency.

With the policies pursued and the gains achieved, Yılmaz said, Türkiye’s economy will be in a much stronger position by the end of the MTP period.

By the end of 2028, he noted, the country will have built an economic structure with lasting macroeconomic stability and sustainable growth.

For the first time, Türkiye’s GDP will approach $1.9 trillion, and per capita income will reach $21,000 at the end of the MTP period, he stressed.

“Our tourism revenues will reach $75 billion, unemployment will be reduced to below 8%, and price stability will be permanently achieved with single-digit inflation,” Yılmaz noted.

“Within the framework of inflation targeting, monetary policy will continue to be supported in full harmony with fiscal and revenue policies.”