Türkiye’s prudent policies achieve important successes: IMF

WASHINGTON

The Turkish authorities’ commitment to reduce inflation while protecting growth has brought important successes: Gradual disinflation, improved confidence in the Turkish Lira and replenished buffers, according to the International Monetary Fund (IMF).

Growth has remained solid, and risks, while still high, have fallen since last year, the IMF said in the staff concluding statement of the 2025 Article IV mission.

“Strong policies have been the key: This year’s reduction in the budget deficit is leaning against inflation, while the Central Bank has used a range of tools to keep real interest rates high and contain financial risks,” it noted.

In the near term, GDP growth is expected to remain solid and inflation should continue to fall gradually, according to the fund.

“A sequential moderation in the second half would bring 2025 growth to around 3.5 percent. Falling policy rates and a less contractionary fiscal stance would support demand in 2026, with resulting stronger investment and consumption pushing growth to 3.7 percent,” it said.

The fund noted that inflation at end-2025 is forecast at 33 percent, above the Central Bank target of 24 percent.

But the slow pace of disinflation is prolonging the period during which the economy is vulnerable to shocks from investor behavior, global risk appetite, or energy prices and this delay carries tangible costs and risks to stability, according to the IMF.

Additional policy effort is needed to bring inflation in line with the Central Bank’s targets and strengthen resilience to shocks, it said, stressing that announcing and implementing a decisive and coordinated shift to tighter policies would help rebuild confidence and set inflation expectations on a clear downward path.

“Building on this year’s fiscal consolidation will be key and should be supported by higher real policy rates, greater exchange rate flexibility and prudent incomes policies," it added.