The coming year 2026 will be the “most critical” in terms of the Turkish government's medium-term economic program,” Vice President Cevdet Yilmaz said on Monday, reaffirming the goal of maintaining stability and the downward trend in inflation.
“Our budget is aimed at a lasting increase in social welfare in an environment where economic growth continues with stability and inflation is decreasing,” he told lawmakers.
Annual inflation surprised in November, cooling more than expected to 31.07%. The figure, which peaked at around 75% in May 2024, is now at its lowest level since November 2021, Daily Sabah wrote in its analytical article.
“2026 is the most critical year of our Medium Term Program (MTP)“, Yılmaz said. “This will be the year when the results of our policy measures will become apparent and when our reforms will bear fruit. The budget has been prepared precisely with this understanding.“
He said he expected external conditions next year to show a more favorable outlook, which he said would contribute relatively more to Turkey's disinflation process and its investment, employment, production and export targets. The government expects 2026 budget revenues to increase by 30.5% compared to the projected 2025 realizations, reaching 16.27 trillion Turkish liras (about 390 billion USD), with tax revenues increasing by 28.9% to 13.83 trillion Turkish liras.
Spending is mainly aimed at rebuilding the southeastern region, which was devastated by earthquakes in early 2023. Total budget expenditures are expected to reach 18.98 trillion Turkish liras in 2026, compared to the projected 14.67 trillion Turkish liras in 2025.
Yılmaz said interest costs are expected to be around 3.5% of gross domestic product (GDP), and the government forecasts a primary surplus of 29 billion Turkish liras. next year. The government expects to end 2025 with a budget deficit of around 2.21 trillion Turkish liras and a primary deficit of 156 billion Turkish liras, the vice president said.
„Clear“ priority
Regarding inflation, Yılmaz said the downward process had become more visible since the second half of this year.
„Annual consumer inflation decreased to 31.1% as of November 2025, with core goods inflation falling to 18.6%. The inflation outlook for December also maintains a positive trajectory,“ he said.
„Our priority is clear and explicit,“ Yılmaz noted. “We will continue to decisively reduce inflation through a comprehensive approach encompassing monetary, fiscal and income policies, as well as structural transformation steps.“
Inflation is expected to fall to around 16% in 2026 and return to single digits from 2027, according to MTP.
“Our goal is for inflation to fall below 20% in 2026, for rigidities in price behavior to be permanently eliminated and for inflation to be reduced back to single digits as of 2027,“ Yılmaz said.
Labor Market
On the labor market, Yılmaz recalled that unemployment was 8.5% in October and remained single digits for 30 consecutive months. The rate could end the year slightly below the level projected in the government program, he added.
“As our capabilities increase, we will continue to improve the conditions of all segments of the population in a way that ensures a lasting increase in prosperity in an environment where inflation is declining“, the vice president said. “We will continue to increase the welfare of our people on a realistic basis, not with a populist, misleading approach.“
Yılmaz said that while they are striving to reduce unemployment, they also plan to introduce a multifaceted set of policies aimed at integrating unemployed labor into production.
“Employment is expected to increase by an average of 842,000 people annually in the coming years, and the unemployment rate is expected to gradually decline to 7.8% by 2028,“ he added.
Growth prospects
Turkey continues to outperform the global average. While the global economy grew by 15.1% between 2020 and 2024, Turkey's production increased by 30.3% during the same period, he said.
The country's economy expanded by 3.7% in the third quarter of this year, according to official data last week, the same pace at which it grew in the first nine months. This capped a 21-quarter streak of sustained growth despite what Yilmaz described as an adverse global and regional environment.
Turkey’s nominal gross domestic product (GDP) surpassed $1 trillion for the first time in 2023. It reached nearly $1.54 trillion in the July-September period, the vice president said.
Per capita income is expected to reach $17,748 by the end of 2025, Yilmaz noted, pushing Turkey above the World Bank’s high-income threshold for the first time.
By 2024, Turkey is the world’s 17th-largest economy in nominal dollar terms and the 12th-largest economy based on purchasing power parity.
„If the 2025 projections "If these measures materialize, Turkey's economy will be the 16th largest in the world in nominal dollar terms and the 11th largest in terms of purchasing power parity," Yilmaz said. "In this way, we expect to surpass Italy's economic size and become the fourth largest economy in Europe."
Trade and Investment
Yilmaz highlighted improvements in foreign trade and investment. Exports reached USD 247.2 billion in the first 11 months of the year, with annual shipments at USD 270.6 billion. Total exports of goods and services are expected to exceed USD 390 billion in 2025.
According to Yilmaz, exports are expected to reach USD 282 billion next year. The current account deficit to national income ratio could end this year at around 1.4%, in line with projections in the Medium-Term Growth Plan (MTP).
Foreign direct investment (FDI) increased by 46% year-on-year in January-September to USD 11.4 billion. Annual FDI reached USD 15.3 billion.
Yılmaz also highlighted a sharp decline in foreign currency-backed deposits (KKM), which fell to just 0.1% of total deposits, while the share of Turkish lira deposits increased to 62.1%.
The value of KKM deposits has shrunk to $600 million from a peak of $140 billion in August 2023.
The reserves of the Central Bank of the Republic of Turkey (CBRT) reached $183.2 billion as of November 28, an increase of $25.5 billion from last year, Yılmaz said.