Introduction to Türkiye’s New Economic Plan
Türkiye’s government has introduced a new economic program aimed at restoring price stability by sustaining disinflation and breaking entrenched inflationary inertia. The updated medium-term program (MTP) covers the period from 2026 through 2028 and sets out to achieve sustainable growth aligned with the ongoing disinflation process.
Priority on Price Stability
The government has revised down growth projections and raised near-term inflation estimates, signaling that price stability is being prioritized over rapid expansion. The forecasted growth rate for this year is 3.3%, down from the earlier 4% projection, due to tight monetary policy. The economy is expected to expand by 3.8% next year and 4.3% in 2027, before rebounding to its average pace of about 5% over the past two decades.
Growth Trajectory and Inflation
The most significant shift in the MTP is the downward revision of GDP growth forecasts, indicating that price stability has become the policy priority. Authorities will seek to gradually raise the potential for growth through structural transformation while driving inflation down to single-digit levels. According to Vice President Cevdet Yılmaz, disinflation remains the government’s top policy priority, and policymakers are committed to ensuring inflation continues on a downward path.
Inflation Trends
Official data shows that the annual CPI softened to 32.95% in August, while it rose 2.04% on a monthly basis. The government expects inflation to slow to 28.5% this year and to 16% in 2026, before dropping to single digits the following year. This marks a retreat from last year’s medium-term program, in which the government predicted single-digit consumer price inflation by next year.
Inflation-Growth Trade-Off
The government acknowledges the short-term trade-off between inflation and growth, reiterating its commitment to curbing inflation without triggering a recession. Disinflation will be pursued "resolutely and without interruption," with the Central Bank of the Republic of Türkiye (CBRT) set to use all available tools to anchor expectations.
Currency and Price Management
The program reaffirms commitment to a floating exchange rate regime, with market supply and demand determining the Turkish lira’s value, except in cases of "unhealthy" pricing behavior or excessive volatility. Authorities will intervene at times to smooth "extreme" moves in the foreign exchange rate, but Türkiye has a floating FX regime and no target for the lira. Administered prices will be managed more closely to align with inflation targets.
Food Inflation and Agriculture
Food inflation, a key driver of overall inflation, receives special emphasis in the program. Agriculture is designated a priority sector, with measures aimed at boosting production capacity and ensuring supply security to reduce vulnerability to shocks. Procurement prices for agricultural products will be set with regard to public finances, market dynamics, and program objectives.
Supporting Disinflation
To support disinflation, the MTP foresees the development of new lira-denominated savings and investment tools to channel resources into priority areas. It also includes measures to standardize and digitize short- and long-term rental contracts over the program period.
Conclusion
Türkiye’s new economic program aims to restore price stability and achieve sustainable growth. The government’s priority on price stability is evident in the revised growth projections and inflation estimates. While there are challenges ahead, the authorities are committed to pursuing disinflation and ensuring a stable economic environment. The success of the program will depend on the effective implementation of its measures and the ability to balance the trade-off between inflation and growth.
