Türkiye’s disinflation efforts are on track to reduce inflation to single digits by 2027, Treasury and Finance Minister Mehmet Şimşek told Reuters in an interview, emphasizing the government’s commitment to maintaining the process despite potential challenges.

Speaking from his office, Şimşek projected that annual consumer price inflation, which slowed to 33.5% in July from a peak of 75% in May 2024, would align with the central bank’s year-end forecast of 19% to 29%. He expects inflation to dip below 20% in 2026 before reaching single digits the following year. “The necessary conditions for disinflation are largely in place,” Şimşek said. “This improvement must be lasting and stable.”

The central bank bolstered these efforts last month by resuming its easing cycle, cutting its policy rate by 300 basis points to 43% after a pause prompted by earlier political uncertainty. Şimşek highlighted the coordinated approach of monetary, fiscal, income, and supply-side policies, noting that “monetary policy supports disinflation through demand, exchange rates, and expectations, while fiscal policy coordination strengthens this effort.”

While acknowledging potential risks from rising oil prices, foreign trade tariffs, and unprocessed food costs, Şimşek stressed the government’s readiness to implement measures to safeguard disinflation. Economic growth in 2025 is expected to fall “slightly below” the 4% target outlined in Türkiye’s medium-term programme, with first-quarter growth recorded at 2%. Şimşek described this as a “temporary slowdown” rather than a severe downturn.

On the fiscal front, Şimşek reported that the current account deficit is projected to remain below targets, though budget revenues may face shortfalls due to slower growth and inflation accounting. The government, he said, remains committed to disciplined spending.

Türkiye has also secured significant external financing, with $17.4 billion obtained from international financial institutions for development projects in 2023 and 2024, and an additional $7 billion in 2025. Şimşek outlined plans to secure over $40 billion in the next three years through partnerships with the World Bank, Islamic Development Bank, and Asian Infrastructure Investment Bank, among others. (ILKHA)