IMF: Türkiye's disinflation program succeeds as growth remains resilient

The International Monetary Fund delivered a positive assessment of Türkiye's economic trajectory Friday, confirming that the country's disinflation strategy has yielded tangible results while growth remains robust. Completing the 2025 Article IV consultation, the IMF noted inflation declined from 49.4% in September 2024 to 30.9% by December 2025, driven by strong fiscal consolidation, prudent income policies, and tight monetary policy. GDP growth is forecast at 4.1% for 2025, with demand for Turkish Lira strengthening and international reserves bolstered.

Policy Mix and Inflation Outlook

The IMF emphasized that the current policy mix "continues to balance disinflation with steady growth," with tight monetary policy, moderate wage growth, and broadly neutral fiscal policy expected to support gradual price stabilization. End-2026 inflation is projected at 23%, while growth is expected to reach 4.2% as policy rate cuts and rising confidence stimulate domestic demand. The current account deficit remains adequately financed, and reserves are projected to stay near 80% of the IMF's adequacy metric, supported by depositor confidence and strong gold prices.

Risks and Reform Imperatives

While acknowledging progress, the IMF cautioned that external risks remain elevated due to persistent global trade uncertainty and regional conflicts. Energy price shocks or adverse weather events could prolong the disinflation period. The gradual approach has also weighed on the financial sector and slowed productivity growth. Executive directors commended authorities for fiscal efforts while urging continued tightening, tax base broadening, improved compliance, and streamlining expenditures through phasing out energy subsidies. Structural reform priorities include improvements in labor markets, education, governance, SME support, and increasing renewables in the energy mix.

Long-Term Projections and Financial Stability

IMF projections indicate 4% average annual growth through 2031, with inflation declining to 19% in 2027 and 15% thereafter. Unemployment is forecast at 8.3% in 2026, rising gradually to 9.1% through 2031. The financial sector remains robust following swift responses to market stress, though directors emphasized the need for a simplified monetary policy framework centered on the policy rate with enhanced central bank independence. Continued vigilance on FX liquidity risks and strengthened oversight of crypto assets were also highlighted as priorities.