For millions of workers, retirees and businesses, the economy dominated Turkey’s agenda in 2025 and it is set to remain the key issue in 2026. The inflation fighting program led by Treasury and Finance Minister Mehmet Şimşek, in place since mid 2023, is expected to continue shaping economic policy.
A year of balance
After peaking at 75% in May 2024, annual inflation is expected to end 2025 at around 30-31%. Although the Central Bank of the Republic of Turkey has cut its policy rate from 50% to 38%, real interest rates remain high. Business groups are calling for structural reforms and policy continuity, while concerns persist that an early election could undermine recent gains. The main expectation for 2026 is a return to economic and political balance.
Growth outlook
Turkey grew by 4.5% in 2023 and 3.2% in 2024. Growth moderated in 2025 but investment in machinery and equipment rose by 11.3%, a key leading indicator. As a result, growth in 2026 is expected to exceed the Medium Term Program forecast of 3.8%, reaching around 4–4.5%.
Inflation risks remain
Despite a rare monthly inflation reading below 1% in November 2025, Turkey remains among the world’s highest inflation economies. While the government targets 16-19% inflation by end 2026, market expectations and international forecasts point to levels closer to 25%. With base effects fading, inflation may remain stuck in the 25-30% range.
Labor market
Headline unemployment stands at 8.5%, but broad unemployment, measuring idle labor has climbed to nearly 30%, meaning three in ten working-age people are effectively jobless. Projections by the OECD and International Monetary Fund suggest unemployment will remain broadly unchanged in 2026.
Current account and budget
The current account deficit is projected at $20.9 billion for 2025, around 1.4% of GDP, easing slightly in 2026. Meanwhile, the budget deficit is expected to rise to 2.7 trillion TL in 2026, up 22% from 2025, highlighting persistent fiscal challenges.
