The commitment of Turkish authorities to reduce inflation while protecting growth has brought "important successes," including gradual disinflation, improved confidence in the lira and replenished buffers, the International Monetary Fund (IMF) said on Saturday.
Growth has remained solid, and risks, while still high, have fallen since last year, the IMF noted 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 of the Republic of Türkiye (CBRT) has used a range of tools to keep real interest rates high and contain financial risks," the fund said in its assessment.
Detailing the economic picture, the IMF suggested that "prudent economic policies have achieved important successes."
Citing that a reduction in the budget deficit from 4.7% of gross domestic product (GDP) in 2024 to a projected 3.6% of GDP this year, mainly reflected the "continued expenditure restraint and improved tax compliance and administration," which it said has "helped curb aggregate demand."
"Inflation has gradually declined, from 49% in September 2024 to 33% in October 2025, and positive real policy rates, even after recent rate cuts, have maintained confidence in the lira," it added.
Also pointing out that growth stood at 3.6% in the first half of the year and that gross international reserves reached $184 billion as of Oct. 31, it said, "The financial system has stayed healthy."
However, it also warned that "still-high inflation leaves the economy vulnerable."
"In line with market expectations, monetary policy is expected to remain contractionary (and) interest rate cuts are expected to continue, but falling inflation expectations will support positive ex ante real rates around the current level, while quantitative measures should remain in place, dampening monetary easing. Price and income policies are expected to be close to CPI inflation," it further said.
"In the near term, GDP growth is expected to remain solid and inflation should continue to fall gradually," it also said.
In addition, it highlighted that 2025 growth could come at around 3.5%.
"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%. Inflation at end-2025 is forecast at 33%, above the CBRT target of 24%."
"Looking ahead, moderate wage growth and, as inflation falls, waning inertia will gradually bring down inflation," it said.
