Cevdet Yılmaz announces year-end inflation forecast

Vice President Cevdet Yılmaz spoke at the ASO Traditional Embassies Reception.

Stating that the Medium-Term Program (OVP) has strengthened predictability, thereby providing a healthy environment for investment, Yılmaz said, "The Medium-Term Program we announced on September 5 is a continuation of the program we announced last year. Our fundamental goals remain unchanged. What are they? To reduce inflation, to bring it down to single digits in the medium term, and while doing so, to maintain our growth and employment at a certain level, and on the other hand, to heal the wounds of the earthquake I mentioned earlier and to rehabilitate the earthquake-stricken regions."

MAIN GOAL IS TO REDUCE INFLATION

Emphasizing that Turkey can increase its economy and social welfare to the extent that it can adapt quickly and effectively to the green and digital transformation, Yılmaz noted the following:

"In this context, while carrying out this transformation on one hand, our main goal, as I just said, is to reduce inflation. Let us reduce inflation so that a more stable environment can be created. Sometimes there are debates about growth and inflation. Of course, this struggle involves some difficulties in the short term. But we must be aware of this: In the medium and long term, there is no contradiction between growth and inflation. On the contrary, these are mutually reinforcing processes. In an environment where inflation falls, predictability increases, stability rises, the investment environment improves, and your growth continues in a stable manner. Therefore, these should not be seen as opposites of each other."

Explaining that the transition period in inflation was completed as of last June, and that risks were reduced and foundations were solidified during this period, Yılmaz said that the country has now entered a disinflation process.

WE ARE IMPLEMENTING IT STEP BY STEP

Vice President Cevdet Yılmaz continued as follows:

"We have started the process of reducing our inflation on a solid foundation. Our inflation had risen to 75 percent during the transition process. With disinflation, there is a rapid decline. There has been a decrease of around 23.5 points in the last few months, and our inflation for August, which we have just reached, has fallen to 52. We estimate that with the September inflation data, we will see figures below 50, in the 40s. We have an expectation of around 41.5 percent by the end of the year. I can express this as an expectation that remains within the Central Bank's forecast range, close to the upper band. Our goal for next year is to fall below 20 percent. In 2026, the following year, our goal is to bring our country back to single-digit figures. We have made the program for this. We are implementing it step by step."

Stating that growth must be maintained while fighting inflation, Yılmaz said that the Turkish Statistical Institute (TÜİK) revised Turkey's growth rate for last year to 5.1 percent, and that 3.8 percent growth was recorded in the first 6 months of this year.

CURRENT ACCOUNT DEFICIT FORECAST

Pointing out that the earthquake had a major impact on the budget deficit, Yılmaz said that the budget deficit was estimated at 6.4 percent last year, but it was closed at 5.2 percent at the end of the year. Yılmaz stated that if earthquake expenditures are excluded, the ratio of the budget deficit to national income was 1.6 percent last year.

Reminding that this year's budget deficit was updated to 4.9 percent with the latest OVP, Yılmaz noted the following:

"In addition to this positive development in the budget deficit, we have also seen a very positive development in the current account deficit. At this time last year, our current account deficit was close to 6 percent. We had a current account deficit of nearly 60 billion dollars. We reduced this to 45 billion dollars by the end of the year. It fell to 4 percent of the national income. At the point we have reached today, when you look at the 12-month retrospective, there is a positive development here. We have reached 2 percent. We estimate the ratio of our current account deficit to national income to be 1.7 by the end of the year."

Underlining that this decline in the current account deficit is very valuable in terms of removing obstacles to the development process, Yılmaz said that this should be integrated with structural reforms, and in this context, productivity and competitiveness in industry should be increased and technological transformation should be realized rapidly.

Pointing out that this improvement in the budget and current account deficit is reflected in the Central Bank's reserves, Yılmaz stated that the reserves, which had fallen to 98.5 billion dollars last year, have now reached the 150 billion dollar level.

UPDATING THE CUSTOMS UNION

Stating that there has been a significant decrease in Protected Turkish Lira Deposit accounts, Yılmaz expressed that these deposits had risen to the 125 billion dollar level last year, while today they have fallen below 50 billion dollars, and that these developments have reflected positively on the country's risk premium, with the CDS risk premium reaching 700 levels last year and hovering around 260-270 levels today.

Noting that the Turkish economy reached a size of 1.1 trillion dollars last year and is expected to be a 1.3 trillion dollar economy by the end of this year, Yılmaz stated that the income per capita will exceed 15 thousand dollars by the end of this year, and this figure will exceed 20 thousand dollars by the end of the OVP.

Reminding that Turkey has attracted 262 billion dollars in direct investment in the last 20 years, Yılmaz stated that this figure was only 15 billion dollars in the previous 20 years.

Expressing that Turkey aims to attract more capital and qualified labor in the coming period, and that this will contribute to the increase in social welfare, Yılmaz said that in line with Turkey's International Direct Investment Strategy, it aims to attract 1.5 percent of international capital worldwide over the next 4-5 years.

Vice President Yılmaz added that the Customs Union between Turkey and the European Union needs to be updated, that this would be beneficial for both sides, and that this update, which will also contribute to the European Union's economic growth and increase its competitiveness, will also create new opportunities for Turkey.