The Turkish government expects inflation to decline to approximately 20% by the end of 2025 as part of its ongoing efforts to stabilize the economy, Vice President Cevdet Yılmaz announced on Saturday. Speaking to business leaders in Ardahan, Yılmaz emphasized the government’s continued focus on reducing inflation, which it sees as the country’s most pressing economic challenge.
"We ended last year with 44% inflation. We see that January’s inflation rate will be lower compared to the same period last year. This trend will continue pulling inflation down, and by the end of the year, we expect it to drop to around 20%," Yılmaz stated. He also reaffirmed the government’s goal of single-digit inflation by 2026-2027.
Macroeconomic Outlook and Policy Measures
The remarks came ahead of official January inflation data, set to be released on Monday. Analysts predict that annual inflation will continue to decline, although monthly inflation may rise due to minimum wage increases and new year price adjustments.
Fitch Ratings, in its latest assessment on Friday, highlighted Turkey’s commitment to a tight monetary stance to combat inflation. The agency expects the Turkish Central Bank to maintain high interest rates and gradually lower the policy rate to 28% by the end of 2025.
Fitch also reaffirmed Turkey’s BB- credit rating with a stable outlook, citing:
- A decrease in the current account deficit as exports rose to $262 billion and tourism revenue exceeded $61 billion.
- A drop in imports, which contributed to economic stabilization.
- An increase in foreign reserves, which rose by $14 billion to $155 billion in 2024 and are expected to reach $175 billion by 2026.
However, Fitch warned that any rapid monetary easing or a shift away from current policies could reignite inflationary pressures and disrupt financial stability.Economic Growth and Employment TrendsTurkey’s GDP growth slowed to 2.9% in 2024, with moderate expansion of 2.6% expected in 2025 due to fiscal consolidation and tight monetary policies. Despite the slowdown, employment levels continue to rise, reinforcing hopes for economic stability.
"Positive real interest rates, low current account deficits, and capital inflows will likely support the sustainability of external buffers," Fitch noted in its report.
As Turkey continues its economic reforms, policymakers will face the challenge of balancing inflation control with economic growth, ensuring that tight monetary policies do not overly constrain the economy. The coming months will be crucial in determining whether Turkey can achieve its inflation targets and maintain macroeconomic stability.
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