Turkey's Fiscal Situation: 2024 Assessment and 2025 Projections

The year 2024 has gone down in history as a year in which Turkey's economic and fiscal structure underwent a painful transformation. The political atmosphere that emerged, especially after the elections, further deepened economic uncertainties and led to serious declines in the public's purchasing power and welfare levels. In this article, while evaluating the fiscal situation of 2024, I will touch upon impoverishment, wages, and injustices in income distribution, and share my projections for 2025.

2024: A Fragile Economic Period

2024 was a year marked by rising inflation, increasing interest rates, and the depreciation of the Turkish Lira. The bill for the populist policies implemented, especially before the elections, was placed on the shoulders of the public in the post-election period.

1. Inflation and Purchasing Power

Although efforts have been made to pull official inflation rates below 50%, it is obvious that the real inflation is much higher. Rising prices on supermarket shelves have made it difficult to even access basic food products. Minimum wage increases have remained insufficient in the face of the high cost of living. Low-income segments, in particular, have struggled even to meet their basic needs.

2. Impoverishment and Injustice in Income Distribution

2024 was a year in which poverty spread to large masses. Inequality in income distribution in Turkey has deepened, becoming an economic and social crisis. While high-income segments have protected their wealth by turning to foreign currency and real estate, low-income segments have been forced to borrow and consume their savings. Social problems, particularly child poverty and women's poverty, have become increasingly visible.

3. Budget Deficit and Borrowing

Turkey's budget deficit has reached a level above projections. The unplanned increase in public expenditures and the insufficiency of tax revenues have pushed the government to borrow more. However, this borrowing, combined with high interest rates, presents a picture that is far from sustainable.

4. Wages and Employee Rights

2024 was a year in which the real incomes of employees eroded. While wage increases in the private sector remained well below inflation rates, salaries in the public sector also remained insufficient. The deterioration in working conditions and the decrease in job security have further increased the demands of labor unions.

5. Foreign Trade and Current Account Deficit

The slowdown in exports and the increase in imports have caused the current account deficit to grow again. Dependence on energy imports, in particular, has depleted foreign exchange reserves, while fluctuations in exchange rates have disrupted foreign trade balances.

2025: Is a More Difficult Year Coming?

As we enter 2025, the structural reforms that need to be carried out for economic recovery have still not been put on the agenda. This situation indicates that 2025 could be a more difficult year in fiscal terms.

1. Tax Burden and New Price Hikes

The government is expected to implement more tax increases and price hikes in 2025 to close the budget deficit. In particular, increases in indirect taxes (VAT, SCT) could further increase the burden on the public. This situation could further deepen the inequality in income distribution.

2. Poverty and Social Tension

Economic difficulties have the potential to increase social unrest. Rising unemployment rates and deepening income inequality could escalate social tensions. As the population below the poverty line increases, the need for social assistance grows, while the sustainability of this assistance has also become questionable.

3. Investor Confidence

Economic and political uncertainties continue to keep foreign investors away from Turkey. This situation limits foreign currency inflows while also undermining economic growth targets.

Solution: Transparency and Structural Reforms

The way out of the economic crisis for Turkey lies in long-term structural reforms rather than short-term populist policies. The rule of law, transparency, and an economy management based on merit can increase the confidence of both domestic and foreign investors.

Recommendations:

• Justice in Income Distribution: Justice should be ensured in the tax system, and the burden on low-income segments should be reduced. Practices such as a wealth tax could be opened for discussion.

• Minimum Wage and Employee Rights: Minimum wage increases should be determined above inflation rates, and the real incomes of employees should be protected.

• Transition to a Production Economy: Dependence on imports should be reduced, and domestic production should be encouraged. Policies that will increase productivity, especially in the agriculture and industry sectors, should be adopted.

Conclusion

The economic difficulties experienced in 2024 contain serious lessons for 2025. However, if these lessons are not learned and the necessary steps are not taken, Turkey's economic future could become even darker. As the public's endurance wears thin, the restoration of economic justice and welfare is a more urgent need than ever. The year 2025 will either go down in history as a lost year or will be the beginning of Turkey's economic rebirth.