Turkey has sharply revised its inflation expectations for the coming years, with Vice President Cevdet Yilmaz unveiling a new medium-term economic programme on Sunday that targets 28.4% year-end inflation for 2026. The figure marks a significant jump from the 16% forecast in last year's plan, reflecting the mounting economic pressures from the conflict in the Middle East.
Speaking in a televised address, Yilmaz said the government expects inflation to resume its downward path in the fourth quarter of 2026, reaching 28.4% by December. The new programme, covering 2027-2029, also projects inflation falling to 21% in 2027, 13.5% in 2028, and 9% in 2029.
The upward revision comes as Turkey's annual inflation rate eased only marginally to 31.51% in August from 31.75% in July, according to official data. Inflation has remained above 30% since December 2021, peaking at over 75% in May 2024 before beginning a slow descent.
War's impact on prices
Yilmaz attributed the higher forecast largely to the ongoing Middle East conflict, which has disrupted supply chains and pushed up energy and commodity prices. "According to our central bank, the direct and indirect effects of the war on inflation have been estimated at approximately seven percentage points," he said.
The revised outlook underscores how geopolitical instability in the region is spilling over into Turkey's economy, complicating the government's efforts to tame price growth. The conflict has also weighed on regional trade routes, with alternative corridors like Azerbaijan's Middle Corridor gaining attention as a potential workaround.
Despite the challenges, Yilmaz insisted that the government had made "significant progress in combating inflation," which remains the top priority of its economic programme. "Inflation, which had risen to 75.5% in May 2024, has begun to show a clear downward trend as a result of the policies we have implemented," he added.
The new forecasts will be closely watched by investors and international institutions, as Turkey's credibility on economic management has been a recurring concern. The country's central bank has pursued a tight monetary policy since 2023, but the latest projections suggest that external shocks are undermining those efforts.
Turkey's situation is not isolated. Across Europe, inflation dynamics are diverging: the eurozone saw inflation accelerate to 3.3% in August, while Germany reported a more moderate 2.9% rate, easing pressure on the European Central Bank's hawks. Meanwhile, Russia is grappling with its own inflation surge after a double utility tariff hike.
For Ankara, the revised outlook means that achieving single-digit inflation will take longer than previously hoped. The government's 2029 target of 9% remains ambitious, especially if regional tensions persist.
Yilmaz's announcement also comes as Turkey's ports continue to expand, with the country climbing in rankings of Europe's busiest hubs, a sign of its growing role in regional trade despite economic headwinds.
The medium-term programme will now be submitted to parliament for approval, where it is expected to pass given the ruling party's majority. However, economists remain divided on whether the new targets are realistic, with some pointing to the persistent depreciation of the lira and high import costs.
