Turkish VP Reassures Investors on Economic Stability

Vice President Cevdet Yılmaz pitched Türkiye's economic strategy to foreign investors on Thursday, emphasizing the government's commitment to taming inflation and achieving sustainable, balanced growth. Speaking at an event at the London Stock Exchange, Yılmaz highlighted the country’s efforts to reduce inflation, strengthen investor confidence, and attract foreign capital.

Inflation Declines, Services Sector in Focus

"Balanced growth, a shrinking current account deficit, improved expectations, and increased foreign capital inflows are all contributing to inflation’s decline," Yılmaz stated at the 2025 Outlook on Private Capital in Türkiye and Environs conference.

Annual inflation, which peaked above 75% in May 2023, has since dropped to just over 40% in January 2025, according to official data. However, Yılmaz pointed out that the services sector remains the primary driver of inflation, making it a focal point of upcoming policies.

The government’s three-year economic roadmap, unveiled last September, prioritizes:

• Reducing inflation to single digits.
• Enhancing economic growth while maintaining disinflation.
• Boosting production-based investments and employment.
• Driving exports through structural reforms.
• Ensuring fair income distribution for social welfare.

Yılmaz stressed that strong coordination between monetary, fiscal, and income policies is crucial to achieving these goals.

Türkiye’s Interest Rate Adjustments & Policy Shift

Following a shift toward more orthodox monetary policies in mid-2023, Türkiye’s central bank aggressively raised its benchmark interest rate by 4,150 basis points, reaching 50% in March 2024 to curb inflation.

However, with inflationary pressures easing, policy rates were cut by 250 basis points in both December and January, bringing the current rate to 45%. The government aims to lower it to 30% by year-end.

Yılmaz emphasized the Economic Coordination Council’s role in closely monitoring and adjusting policies to maintain stability.

Türkiye’s Economic Growth Beats Expectations

Despite global economic challenges, Türkiye’s economy grew 3% year-over-year in Q4 2024, resulting in full-year GDP growth of 3.2%—exceeding projections despite the impact of high interest rates.

Originally targeting 3.5% GDP growth, the government lowered its expectations to reflect adjustments in domestic demand and anti-inflationary measures.

"Fourth quarter data reveals the resilient structure of our economy and our determination to follow a sustainable growth path," Yılmaz wrote on X (formerly Twitter). He noted that domestic demand is recovering healthily, reinforcing macroeconomic stability.

Challenges & Future Outlook

Yılmaz also acknowledged global risks, including:

• Rising protectionist policies.
• Geopolitical tensions.
• Economic policy uncertainties worldwide.

These factors, he warned, pose downside risks to global growth and upward pressures on inflation.

Despite these challenges, Yılmaz remains optimistic about Türkiye’s economic trajectory, citing strong policy coordination and a commitment to long-term stability.