The medium-term program (MTP) has a "strong and reliable" framework, Treasury and Finance Minister Mehmet Şimşek said at the forum in Washington on Wednesday, expressing that markets and investors are beginning to believe that inflation would decrease and the program would yield results.

Outlining Türkiye's policy priorities and providing insight into the Turkish economy at the Global Outlook Forum, organized by the Institute of International Finance (IIF) alongside the World Bank/IMF Spring Meetings, the minister noted the program aims to restore price stability and fiscal discipline while addressing other macroeconomic challenges such as reducing the current account deficit.

"The ultimate goal is to achieve sustainable high growth rates and welfare for everyone," he added.

Şimşek pointed out that the most significant short-term challenge is high inflation, affirming they would continue to support the central bank's efforts to combat inflation through fiscal policy.

Explaining that the main objectives of the program are to ensure price stability, increase competitiveness and efficiency and implement structural reforms, the minister recalled that last year's earthquakes in Türkiye caused a significant deficit in the budget and noted that important measures have been taken to reduce the deficit.

Program targets

Furthermore, he stated that the improvement in growth expectations of Türkiye's main trading partners would support external demand, underscoring the contraction observed in the current account deficit.

"The current account deficit is contracting beyond our program targets," he said.

He also noted that monthly inflation is slowing down and annual inflation is expected to start declining from the second half of this year.

"Reducing inflation is our priority goal. We are already seeing signs of this month by month, but we will see the trend on an annual basis in the second half of the year," he said.

"We want to see inflation drop to single digits by 2026, and until then, we will implement quite comprehensive structural reforms."

Consumer prices rose 68.5% in March compared with a year earlier, with a month-over-month increase of 3.16% from February to March, according to official data.

The Central Bank of the Republic of Türkiye (CBRT) has raised its key one-week repo rate by 4,150 basis points from 8.5% to 50% since last June seeking to ease demand, the main driver of inflation.

After last month's 500 basis point hike that stunned the markets, the bank cited a deteriorating outlook and pledged to tighten even further if it expects the price situation to worsen significantly. The bank's next rate-setting meeting is scheduled for April 25.

The CBRT Governor Fatih Karahan, who accompanied Şimşek to attend the spring meetings of the International Monetary Fund (IMF) and the World Bank held in the U.S. capital this week, acknowledged that inflation "is our primary concern," saying, "We want to return to single-digit inflation."

The bank, in its last quarterly report, kept the inflation target at 36% at the end of this year, seeing inflation dropping to 14% in 2025 and single digits in 2026. Still, markets predict this year's end figure would likely hover slightly beyond the CBRT's current target. Karahan is expected to present the latest inflation projections in May.

Investors' perspective

Moreover, Şimşek said they have had numerous meetings with investors adding their perspective on Türkiye has changed compared to last year.

"Last year, investors had doubts about deviating from orthodox policies and the possibility of not implementing the program. This year, almost no questions were asked about the continuity of the program; now, questions are more about the details of the program," he noted.

Following last year's presidential and parliamentary elections, a new economy team orchestrated a U-turn in economic policies, with the central bank embarking on a long cycle of rate hikes. Alongside, the government has in September unveiled a new medium-term program, which Şimşek on multiple occasions said has the full support of President Recep Tayyip Erdoğan.

Emphasizing their determination to support the central bank in fiscal matters, Şimşek said, "We will strengthen the program and accelerate forward-looking structural reforms."

"There is a very strong interest in Turkish assets. We just have to convince locals that inflation is going to fall," he noted.

He also mentioned that the market's inflation expectations for the next 12 months are around 36%.

Pointing out that there are no elections in Türkiye until June 2028, Şimşek said that this would provide ample time politically for achieving program results. He noted that the Turkish economy is resilient, highlighting a vibrant private sector and a strong culture of entrepreneurship in the country.

Şimşek emphasized that Türkiye has long-term advantages compared to benchmark countries, noting that global indebtedness is a slowing factor for growth and that Türkiye's debt-to-GDP ratio is lower than the average of developing countries.

He also highlighted that green transformation is one of Türkiye's biggest priorities, stating that as of last year, 55% of installed power capacity is based on wind, solar and hydroelectric energy and the ongoing construction of a nuclear power plant would also be commissioned.

"We are committed to decarbonizing the Turkish economy through investments that will increase competitiveness and productivity through green transformation," he concluded.