Türkiye targets $2.2T economy, single-digit inflation by 2029

Türkiye aims to expand its economy to $2.2 trillion, create 2.1 million additional jobs and bring inflation back to single digits by the end of 2029, Vice President Cevdet Yilmaz said Wednesday.

Yilmaz, Treasury and Finance Minister Mehmet Simsek and Presidency of Strategy and Budget head Ibrahim Senel met with foreign media representatives at the Presidential Complex in Ankara as part of the “2027–2029 Medium-Term Program (MTP) International Media Meeting.”

Yilmaz said the MTP, updated annually in line with Türkiye’s development plans, sets out macroeconomic projections and policy priorities as well as the framework for public revenue, expenditure and borrowing.

The program also forms the basis for preparing the annual budget and defines the reform agenda for the coming period, he added.

MTP built on gains of past 3 years

Yilmaz said the government would build on the macroeconomic gains achieved since 2023 and transform greater stability into sustainable growth and productivity.

“We project that growth, which we expect to be realized at 3.3% in 2026, will strengthen gradually to reach 4.2% in 2027, 4.6% in 2028 and, finally, 5% at the end of the program,” he said.

The government aims for sustainable growth that is consistent with macroeconomic stability, increases production capacity and productivity, and does not generate inflationary pressure, he added.

Total factor productivity is expected to contribute around 1.2 percentage points to growth in 2026 and approximately 1.1 percentage points annually throughout the program.

National income is projected to exceed $1.8 trillion and per-capita income to surpass $20,000 for the first time by the end of 2026.

By 2029, nominal GDP is expected to reach $2.2 trillion and per-capita income around $25,000, while combined exports of goods and services are projected to rise to $450 billion.

“That will be the first time we exceed the $2-trillion threshold,” Yilmaz said.

Inflation expected to return to single digits

The government expects year-end inflation at 28.4% in 2026 before it slows to 21% in 2027 and 13.5% in 2028, ultimately returning to single digits in 2029.

Yilmaz said inflation, which peaked at 75.5% in May 2024, entered a clear downward trend before supply-side pressures caused by the regional war temporarily slowed the improvement.

Annual inflation stood at 31.5% in August, he said, adding that it was expected to resume its downward trend in the final quarter.

Food, fuel, natural gas and transportation services, which together account for 34.5% of the consumer price index basket, were particularly affected by the war, he noted.

According to the Turkish central bank, the war's direct and indirect effects added around 7 percentage points to inflation.

“Without this 7-percentage-point effect, our year-end inflation would have been around 21%,” Yilmaz said.

“As the impact of supply shocks weakens, we expect the downward trend in inflation to become pronounced once again, supported by a tight and coordinated policy framework.”

He said lower inflation and stronger price stability would support sustainable growth, social justice and income-distribution objectives.

War affects global economy

Yilmaz said weaker external demand and higher commodity prices prompted the government to revise several projections for 2026.

The growth forecast for Türkiye’s main trading partners was lowered to 1.6% from 2.4%, while the projection for the Middle East and North Africa was cut to minus 0.5% from 3.4%.

“This war has affected the whole global economy, but especially the euro area and MENA have been affected, and that has translated into our trade perspective,” he said.

The assumed average Brent crude price was raised to $89.3 per barrel from $64.3, while the projection for non-energy commodity prices was revised from a 5.7% decline to an 18.6% increase.

Global inflation is now projected at 4.7%, up from 3.6%.

Changes affect current account balance

Türkiye’s trade deficit is expected at $105 billion in 2026, compared with an earlier projection of $96 billion, largely because the energy import bill was revised to $71 billion from $63 billion.

Tourism revenue is projected at $65 billion, down from $68 billion, while the current account deficit forecast was raised to 2.6% of GDP from 1.3%.

Yilmaz described the deterioration as temporary rather than structural, saying the deficit would fall below 2% next year and decline to 1.6% by the end of the program.

“Our current account deficit is well below our historical averages, and we believe that it will continue to be so in the coming years,” he said.

Confidence in Turkish lira increases

Yilmaz said the share of Turkish lira deposits had nearly doubled over the past three years, while foreign-exchange deposits declined below 40%.

“Foreign-exchange-protected deposits, which were a very important contingent liability for the Turkish economy, are now at zero,” he said.

“They have been completely eliminated, and we have done this through a smooth process, without harming financial markets or financial stability.”

Türkiye’s gross reserves increased from $98.5 billion in May 2023 to $188.2 billion as of Aug. 28, 2026 — a rise of nearly $90 billion.

The country’s five-year credit default swap premium fell from more than 700 basis points in May 2023 to below 220, reducing borrowing costs for the public and private sectors.

Türkiye’s public debt-to-GDP ratio stood at 23.9% in 2025, compared with almost 80% in emerging economies and more than 100% in advanced economies.

Its corporate debt ratio was 38.9%, compared with 52.4% in emerging markets and nearly 90% in advanced economies.

Regarding budget deficits, he noted that despite earthquake-related and temporary expenditures, the budget deficit-to-GDP ratio has remained below initial targets.

He explained that earthquake-related expenditures play a significant role in budget deficits, but that the share of such expenditures in the budget has decreased over time.

Program to provide 2.1M additional jobs

Türkiye expects to generate around 700,000 jobs annually, creating 2.1 million additional jobs during the program and reducing unemployment to below 8%.

“This will be generated through growth, of course, but not only through growth. We will also pursue labor market reforms and active labor market policies,” Yilmaz said.

Employment policies will focus on vocational training, workforce skills and adaptation to technological change, particularly artificial intelligence, while supporting young people, women and people with disabilities.

Green transition to bolster economic stability

Yilmaz said Türkiye will host COP31 this year, with preparations underway to welcome delegations from numerous countries in Antalya.

Türkiye is continuing to work toward its long-term carbon-free economy targets, he said, adding that the climate agenda is compatible with the country’s macroeconomic policies as Türkiye imports fossil fuels.

“If we make progress in the green economy, it will not only contribute to our climate objectives; it will also strengthen our macroeconomic stability by reducing the current account deficit and increasing our domestic capacity,” Yilmaz said.

“I believe Türkiye is one of the fortunate countries that can advance its climate objectives by combining them with its development objectives.”

Green and digital transformation form the backbone of Türkiye’s development strategy and 12th Development Plan, he added.

‘Aware of realities of new economy’

Turning to Asia, Yilmaz said Türkiye would continue expanding trade with the region as part of its market-diversification strategy.

“Market diversification is one of the strategies in our trade policy. Japan, in particular, is a very friendly country, and we are developing very good relations with Japan,” he said.

Yilmaz said talks between President Recep Tayyip Erdogan and Japanese Prime Minister Sanae Takaichi had been productive and constructive, adding that cooperation would continue in numerous fields.

Noting the growing weight of Asia and China in the world economy, he said Türkiye remained committed to a rules-based international trading system while adapting its policies to rising protectionism.

“We will maintain relations with our partners based on mutual benefit,” Yilmaz said. “Relations based on mutual benefit will be sustainable.”

The balance in economic relations should be assessed through not only trade in goods but also services, tourism, financial investment and foreign direct investment, he added.