Türkiye Remains Insistent on Disinflation Goals

In a recent interview with Reuters, the Treasury and Finance Minister Mehmet Şimşek emphasized that Türkiye will not back down on its ongoing disinflation attempts. Şimşek claimed that as the process continues, him and his team aim to bring inflation to single digit numbers by 2027.

The consumer price inflation is 33.52% as of July 2025, approximately 42% below the percentage in May of 2024 which was the peak period. This has been the lowest reported figure as of November 2021. Şimşek claimed that the inflation will meet the central bank’s end-of-year goals set between 19% to 29% and is estimated to be lower than 20% in the following year. Positive changes in inflation for core sectors were observed, with inflation in the service industry going under 50% (last seen three years ago), food inflation dropping to 28%, and core goods inflation dropping to 20.7%. These reflect solid changes in the different sectors. For instance, food inflation being lower signifies improvements in the agricultural sector, and core goods inflation data suggests a stronger lira.

Credits: Ilkha

Another benefit to the economy also emerged through the easing cycle. The easing cycle is when central banks decrease interest rates in order to stimulate economic growth. The cycle was able to prosper when the central bank reduced its policy rate by 300 basis points last month, which was previously disrupted due to rising political tension around the country. The cycle continued to progress as disinflation resumed and markets experienced fewer disruptions.

Throughout the interview, the important role that proper synchronization of monetary, fiscal, and supply side policies play in achieving long-term goals sustainably and steadily were mentioned. Şimşek stated that "Monetary policy provides strong support to disinflation through the channels of demand, exchange rate, and expectations, while increased coordination with fiscal policy reinforces this effort.”

Although the interview spoke well of the current state of the Turkish economy, certain downsides were also acknowledged. For example, it was admitted that the economic growth period of 2% is slightly less than the original medium-term program target set at 4% in the first quarter. Nonetheless, Şimşek claimed that this represented only a “temporary slowdown” and not a major economic downfall. He reinstated that the government was set on “prevent[ing] any obstacle to disinflation by taking the necessary steps to counter potential shocks.” The possible shocks mentioned include unprocessed food, oil prices, and foreign trade tariffs. To add on, the current account deficit is also anticipated to be below targets set earlier due to inflation accounting and slowing economic growth.

Additionally, Şimşek touched upon the current situation with external financing for the upcoming years. He stated that the government has acquired external financing adding up to 17.4 billion dollars in 2023 and 2024 combined with an additional 7 billion in beginning-mid 2025. Upwards of 40 billion dollars are forecasted to be collected in the upcoming three years from reputable cooperations with the World Bank, the Islamic Development Bank, and the Asian Infrastructure Investment Bank.

Lastly, Şimşek mentioned the new international tariffs set by Donald Trump that will increase duties on Turkish imports. Şimşek claimed that while the brackets are 5% higher (at 15%) compared to what was announced in April, in comparison to other nations in Asia and Latin America, Türkiye is among the countries exposed to the lowest tariffs. Close monitoring is being carried out on how international political changes such as rising oil prices may affect Türkiye’s inflation.

Looking ahead, the Turkish government is pursuing major initiatives to sustain disinflation, stabilize the economy, and boost productivity. A balance of discipline, transparency and structural reforms are required and expected as these plans are put into further development.

Edited by: Leyla Hacıoğlu