Inflation in Türkiye is falling and is foreseen to drop further to 24% by the end of the year, in accordance with a revision of the country's central bank, Treasury and Finance Minister Mehmet Şimşek said on Saturday.
At the same time, the minister also downplayed the potential consequences of tariffs imposed by U.S. President Donald Trump, suggesting he does not expect special protectionist measures against Türkiye.
"We are making progress in the fight against inflation, that is, inflation is falling, there is a slowdown in the increase in prices," Şimşek said in a televised interview, evaluating the outlook of the Turkish economy.
"Compared to January last year, inflation has fallen by about 23 points," Şimşek said, recalling that inflation ended the last year at 44% and that it stood at 65% at the end of 2023.
"We expect it to fall to 24%, therefore there is a decline in inflation and it will continue," he added.
The minister's remarks came a day after the Central Bank of the Republic of Türkiye (CBRT) updated its year-end inflation estimate to 24% from the previous 21% while keeping expectations for inflation to drop to 12% in 2026 and 8% a year after, respectively.
Annual inflation, which peaked above 75% in May last year, eased to 42.12% in January, according to the official data. Monthly inflation climbed more than expected to 5.03% due to a minimum wage hike and several new-year price revisions.
Pointing out monthly inflation in the first month of the year, Şimşek said that it created certain discussions but underlined that this was the "lowest inflation in January in the last four years."
He suggested it was within the band announced by the central bank as the uptick of approximately 3.5% to 4% was expected. Moreover, the minister explained that the slightly higher rise came due to one-time impacts related to several factors such as the change to basket weight in the consumer price index (CPI) and the increase in contribution fees for health services, which he said occured after long time and brought approximately 0.6% to the increase.
Accordingly, he suggested that January’s inflation data did not disrupt their economic strategy and expectations as headline inflation continues to fall.
However, he also acknowledged the public’s concerns over the rising costs, suggesting rents and residential prices as effect of this since over 80% of the population lives in the cities.
"Here we are in a serious effort to increase the supply side, that is, housing supply," Şimşek said. Furthermore, noting that while the reconstruction process in the earthquake region continues, they also provide support to other initiatives such as urban transformation and transformation on the site, Şimşek also conveyed an aim for additional housing mobilization in the upcoming period.
He also highlighted the importance of determination and patience, in addition to fiscal policy, monetary policy, and demand-sided policies for the economic program, reiterating that inflation is falling.
"Our citizens are right to complain about high (cost of living). Because inflation is a very unfair tax. It especially hits those with fixed and low incomes. It disrupts income distribution," he said. "That is why, when you look from a macroeconomic perspective, inflation is the biggest evil ... We are committed to fighting inflation seriously."
"Citizens should rest assured that we are seeking a lasting solution," he added, as there is no "short way" since "fight requires time."
Additionally, Şimşek reiterated the government’s determination to phase out the foreign exchange-protected deposit scheme, the so-called KKM, announcing that the program for corporate accounts would be terminated in the first half of the year.
"We have made KKM unattractive. KKM has been falling continuously for 76 weeks. Steps can be taken even today if desired, but we prefer a soft transition. We will take these steps gradually," he said in reference to the gradual exit from the scheme that began in August 2023.
At the same time, commenting on the economic measures the new Trump administration has been taking, Şimşek downplayed potential impacts on the country as he said the direct risks to Türkiye "are very low."
He noted that Türkiye does not have a surplus in trade with the U.S., suggesting that when looking at 20 years period, the U.S. has a surplus. Şimşek also recalled Türkiye and the U.S. do not have a free trade agreement (FTA).
"The U.S. is already imposing high taxes on us. Consequently, there is no reason to increase these taxes further," he added.
"In this respect, two things remain to consider. First, the U.S. tariff hikes may have indirect effects," he said.
He further suggested that the tariff increases announced against China so far are not very dramatic, considering they are 10%. However, he maintained that the scenario would be different if this figure were 50% or 60% because it could result in, for example, growing "supply to our markets" if those Chinese goods were not sold to the U.S.
Secondly, what remains could be some politically motivated steps, according to the minister.
"But we have good relations with the new U.S. administration. The dialog and relations between our President (Recep Tayyip Erdoğan) and the U.S. President (Donald Trump) are good," he outlined.
Thus, Şimşek said he did not believe the U.S. administration would consider imposing special protectionist measures against Türkiye.
