What the medium-term program shows
Turkey is trying to thread the needle between cooling prices and keeping the economy moving. Unveiling the program on Sunday, Vice President Cevdet Yilmaz said the focus is to "firmly continue the disinflation process and establish price stability on a lasting basis, along with a sustainable growth objective." He also noted, "We prepared the program on the assumption that the elections would be held as scheduled." The plan runs until 2029 and cuts this year's GDP growth outlook to 3.3% from 3.8%.
Growth and budget numbers
The document points to 4.2% growth next year, down slightly from 4.3% previously, and pares back the 2027 projection. It also lifts the estimated 2027 budget deficit to 3.5% of GDP, higher than the earlier 3.1% forecast.
Inflation, central bank moves, and energy costs
The program sets a 21% inflation goal for the end of 2027, replacing a prior 9% target, while the central bank's own end-2027 projection is 15%. Annual consumer price gains most recently cooled to 31.5% in August, and policymakers are aiming to push that below 30% by year end. Central Bank Governor Fatih Karahan said medium-term inflation projections are coordinated with the program and linked the gap with earlier estimates to the war in Iran, which turned out stronger than anticipated. The start of that conflict, together with the surge in energy costs, has knocked the disinflation trend off course.
Rate policy has already shifted in response. Once the Middle East conflict kicked off in late February, the central bank halted its rate cuts, tightened financial conditions, and in effect implemented a stealth increase that wasn't unwound until August, when the rate stood at 37%.
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Politics and what it means for your portfolio
These targets serve as crucial markers for investors assessing the rate trajectory and overall policy stance in the run-up to presidential elections slated for 2028. Analysts have floated the chance of a snap vote as early as late 2027, a scenario some see as a route for President Recep Tayyip Erdogan to navigate the two-term limit and run again. Treasury and Finance Minister Mehmet Simsek said that while inflation is still higher than desired, it has not spun out of control in a "challenging environment" shaped by trade frictions and geopolitics. For your money, the mix of softer growth, a higher inflation target, and election chatter means paying attention to where borrowing costs and financial conditions settle next.
