The International Monetary Fund (IMF) forecasts a significant decrease in Turkey’s inflation rate. Expecting it to drop to around 24% by 2024. This prediction highlights the positive effects of the economic policy shifts Turkey has implemented since mid-2023, which have been crucial in stabilizing the economy and restoring market confidence.
Economic Policies and Their Impact
Turkey’s government took bold steps by tightening monetary policies. Including a substantial hike in the key policy rate by 4,150 basis points. These actions were necessary to address the severe inflation challenges the country faced. The IMF reports that these efforts are starting to pay off, as seen in the recent easing of inflation that began over the summer.
Expected Growth and Inflation Trends
The IMF suggests that continued reduction in inflation will likely boost economic confidence, potentially raising Turkey’s growth rate to between 3.5% and 4%. However, inflation remains a concern, with expectations of it settling around 43% by December 2023. This high inflation rate, despite some improvement, continues to challenge the economy.
Outlook for Turkey’s Economy in 2024
In the first quarter of the year, Turkey’s economy grew by 5.7%, a figure that ranks among the highest globally. However, the IMF warns that the series of interest rate hikes and tight monetary policies could lead to slower growth in 2024.With a projected increase of approximately 3.4%. The IMF emphasizes that a tighter fiscal policy will be crucial in controlling inflation and ensuring sustainable economic growth.
Maintaining Financial and Economic Stability
The IMF advises the Central Bank of Turkey to carefully manage exchange rate volatility. Ensuring that the Turkish lira does not appreciate unnecessarily while focusing on rebuilding reserves. Turkey has already made progress in this area, with international reserves increasing by $91 billion since April. This has helped reduce the current account deficit and improved the country’s sovereign risk rating.
Key Recommendations for Future Growth
Looking ahead, the IMF recommends that Turkey continue to strengthen its economic policies. This includes supporting small and medium-sized enterprises (SMEs), improving labor market efficiency, and advancing environmental initiatives to support sustainable growth. The IMF also recognized Turkey’s removal from the Financial Action Task Force (FATF) “gray list” in June as a positive development, enhancing the country’s economic outlook.
