Turkey Sticks to Economic Plan as Inflation Eases to 38.1%

Turkey's Finance Minister Mehmet Simsek said the government will stay the course on its economic program despite recent political tensions and global trade developments. Inflation, which dropped to 38.1% in March from a peak of 75% last May, is projected to land within the central bank’s forecast range of 19% to 29%, with a midpoint target of 24% by year-end.

Simsek emphasized that the recent arrest of Istanbul Mayor Ekrem Imamoglu and U.S. President Donald Trump’s new tariffs add uncertainty, but do not warrant a policy shift. He highlighted that while it's too early to assess the long-term impact of recent market fluctuations, the economic framework remains stable and focused on price stability.

Despite ongoing pressure on lira-denominated assets, Simsek expects limited pass-through effects to inflation due to weak domestic demand. He stated that the government does not foresee major deviations from its economic targets and remains committed to maintaining tight fiscal discipline.

Simsek also projected a stronger current account performance, expecting the deficit to fall below the previously forecasted 2% of GDP. He noted that protectionist trade policies might hinder global growth, but tighter domestic financial conditions are likely to curb imports and help balance external accounts.

On fiscal matters, Simsek reaffirmed a commitment to budget discipline, stating that while tight financial conditions could impact revenues, they would not significantly disrupt the broader economic plan. He concluded that fiscal restraint would support the disinflation process and ensure macroeconomic stability.