Turkish Vice President forecasts single-digit inflation by 2026 in new recovery plan

Turkish Vice President Cevdet Yılmaz outlined ambitious economic and recovery plans in a comprehensive Medium-Term Program aimed at bolstering the nation's economic stability and infrastructural resilience. Addressing an array of business executives, representatives of non-governmental organizations, and local authorities, Yılmaz revealed a multi-pronged strategy encapsulating macro-economic stability, inclusive growth, and social equity, driven by three main tools of fiscal discipline, prudent monetary policies, and structural reforms.

During his speech, Yılmaz highlighted that the Medium-Term Program would commence its endeavors with a focus on mitigating the devastation inflicted by the catastrophic earthquake in February, a disaster characterized by Yılmaz as unprecedented in the nation's history. The government anticipates allocating approximately 3 trillion lira towards the rehabilitation and restoration efforts, spread over the coming years, with 762 billion lira being dispensed from the central government budget this year alone.

In his discourse, Yılmaz stressed the fundamental role of disaster risk reduction investments, aiming to preemptively identify and manage risks associated with diverse calamities, such as floods and landslides that have plagued various regions of the country. This initiative represents not only a recovery effort but also a long-term investment in fortifying the nation's structural and environmental defenses.

On the economic front, the Vice President conveyed optimism, expressing a robust belief in the eventual descent of the escalating inflation rates. Yılmaz acknowledged the temporary surge in inflation this year, attributing it to a combination of factors including fluctuations in exchange rates and wage developments. However, he maintained a firm stance that this uptick is transitional. Citing the government's proactive policies, he projected a gradual decline starting from the next year, anticipating a return to single-digit figures around 8.5% by the year 2026.

Simultaneously, Yılmaz assured that the government would not overlook growth, emphasizing a transformation in the composition of economic growth from consumption-driven to an expansion predominantly fueled by investment, production, and exports. This shift aims not only to foster a growth that counteracts inflation but also augments export revenue, thereby supporting the battle against inflation.

In an empathic note, Yılmaz underlined that the ultimate objective of these efforts is to elevate social welfare and justice, safeguarding the lower-income sectors from adverse impacts and prioritizing their well-being in policy implementations. This notion of fostering societal prosperity forms one of the four main goals of the program, encompassing disaster recovery, bringing down inflation to a single digit, sustaining growth and employment, and advancing social justice and prosperity.

To realize these objectives, Yılmaz identified three principal instruments: maintaining fiscal discipline, adapting monetary policies to contemporary needs, and implementing structural reforms. The Vice President asserted that fiscal discipline would be upheld by utilizing resources more efficiently and effectively, allocating them judiciously to priority areas. While the budget deficit is expected to reach around 6.5% of the national income due to unavoidable earthquake-related expenditures, a decline is anticipated in the subsequent years, targeting a deficit below 3% by 2026, aligning with the Maastricht criteria of the European Union.

Delving further, he revealed that monetary policies would undergo necessary modifications to meet the prevailing conditions and demands of both Turkey and the global landscape. The Central Bank, adhering to the macro goals outlined by the government, would continue to fulfill its role in combating inflation and ensuring price stability, maintaining its tool independence.

Yılmaz also unveiled an augmentation to the Medium-Term Program through the incorporation of seven key structural reforms, derived from comprehensive consultations. These reforms, requiring either legislative approval or administrative decisions, are poised to further strengthen the nation's resilience and economic stability.

In conclusion, Vice President Yılmaz affirmed a unified vision and commitment towards fostering a safer, prosperous, and equitable future for the people of Turkey, marshalling the combined efforts of government, businesses, and communities in this comprehensive endeavor.