Turkey unveiled a medium-term economic program extending to 2029 on Sunday, lowering gross domestic product growth forecasts while raising its projections for inflation and the budget deficit.
Revised growth and deficit targets
Under the updated framework, the government trimmed its GDP growth projection for the current year to 3.3 percent from a previous estimate of 3.8 percent. It also lowered next year’s growth expectation to 4.2 percent from 4.3 percent.
Fiscal projections saw upward revisions across the forecast horizon. The budget deficit forecast for 2027 was raised to 3.5 percent of GDP, compared with a prior projection of 3.1 percent of GDP.
Vice President Cevdet Yilmaz stated that the program was prepared based on the premise that elections will take place according to the established schedule. Deficits remain elevated across the multi-year path.
Shifting inflation trajectory
The revised program lifted the target inflation rate for the end of 2027 to 21 percent, up from an earlier target of 9 percent. The Central Bank of Turkey maintains an inflation forecast of 15 percent for the end of 2027, creating a divergence between the two official projections.
Central Bank Governor Fatih Karahan attributed the discrepancy from earlier inflation estimates to the stronger-than-expected impact of the war in Iran and sharp rises in energy costs. The adjustments follow an annual consumer price inflation reading of 31.5 percent in August, which sits above the official end-of-year target ceiling of 30 percent.
Yilmaz said the objective is the firm continuation of the disinflation process and the lasting establishment of price stability, together with reaching a sustainable growth target. Price pressures persist.
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Source: Turkey
