The Turkish government expects inflation to drop to around 20% by the end of the year, Vice President Cevdet Yılmaz said Saturday amid a backdrop of easing in recent months and ahead of the first reading this year.
"We are trying to heal the wounds of the earthquake in 2023. Throughout all this process we continue our fight against inflation, which we see as the most fundamental issue," Yılmaz told a meeting with businesspeople in eastern Ardahan province.
"We completed last year with 44%. We see that January of this year will be lower compared to January of last year. We estimate this. This will continue to pull inflation down. When we come to the end of the year, we expect inflation to drop to around 20%," he said.
"We are also targeting single-digit figures in the 2026-2027 perspective," he added.
The vice president's remarks came before the official data for the January inflation rate, due to be released on Monday. Recent polls suggest that the fall in annual inflation is likely to persist while the month-over-month inflation would post an uptick due to an increase in the minimum wage and price adjustments at the start of the new year.
Fitch Ratings in its last assessment of the Turkish economy on Friday said it expected the Turkish central bank to "maintain a tight monetary stance to support disinflation with the aid of macroprudential measures."
It also said it expected the central bank to reduce its policy rate to 28% by end-2025.
Noting that employment in the country continues to increase, Yılmaz said, "Last year, our exports reached $262 billion. It was announced yesterday that our tourism revenue exceeded $61 billion. On the other hand, our imports decreased. Therefore, our current account deficit decreased."
Meanwhile, Fitch affirmed Türkiye's credit rating at "BB-" on Friday with a "stable" outlook.
Fitch estimated that Türkiye’s gross domestic product (GDP) growth slowed to 2.9% in 2024 and forecasted moderate growth of 2.6% in 2025 due to tight monetary policies, fiscal consolidation and a moderate minimum wage increase.
The agency said that external buffers have shown improvement, with international reserves rising by $14 billion to $155 billion in 2024.
However, it also warned that the "rapid easing of monetary policy or the abandonment of the current policy direction, which is not our base case, could reignite inflationary pressures."
"Positive real interest rates, low current account deficits and capital inflows will likely support the durability of the improvement in external buffers. Consequently, we forecast Turkiye will maintain reserves coverage broadly in line with peers, as reserves will rise to $175 billion by 2026," it noted.
