Turkey's 'Medium-Term Program' report card: Targets are being renewed, deviations are growing

Setting targets in the economy is easy; the real issue is achieving them. Turkey's new Medium-Term Program (MTP), covering the 2027-2029 period, presents an ambitious future perspective ranging from growth to inflation, employment to the current account balance, and public finance to structural reforms. However, the large deviations between targets and actual outcomes in previous programs raise a more fundamental question before even considering the new targets: Is the MTP a reliable roadmap guiding the economy, or is it a document where unachieved targets are rewritten every year?

When evaluating the Medium-Term Program last year, our fundamental question was: Will the MTP be a roadmap that truly guides the economy, or will it turn into a document that gathers dust on shelves over time? A year has passed, providing us with a stronger benchmark today: being able to compare previously announced targets with actual outcomes. This is because the MTP is not just a technical text containing forecasts for growth, inflation, or the current account deficit; it is one of the primary policy documents that determines the three-year main framework of economic policy, from the use of public resources to budget and borrowing policies, and from structural reforms to the investment environment.

The new MTP also lists strengthening macroeconomic and financial stability, maintaining fiscal discipline, and ensuring permanent price stability among its primary priorities; it adds productivity, R&D, human capital, green and digital transformation, the investment environment, and the fight against the informal economy to this list. Of course, it is natural for the MTP to be updated every year. Global conditions can change; wars, energy prices, external demand, and financial fluctuations can disrupt forecasts. It is also unrealistic to expect economic projections to be realized exactly. However, there is a significant difference between a forecasting error and a systematic target deviation.

Indeed, MTPs in recent years point to serious deviations, especially in inflation, exchange rates, and the current account balance. The new program's own figures show this: while the growth forecast for 2026 in the previous MTP was lowered from 3.8 percent to 3.3 percent, and industrial growth from 4 percent to 2.3 percent, the inflation forecast was raised from 16 percent to 28.4 percent, and the current account deficit/GDP forecast was raised from 1.3 percent to 2.6 percent. The expectation for energy imports also rose from 63 billion dollars to 71 billion dollars.

For this reason, it is no longer enough to just ask, "What does the new MTP promise?" The real question is: If previously announced targets change to this extent, how much can we trust the new targets?

GROWTH: Why is the 5 Percent Target Constantly Postponed?

The new MTP projects that after the Turkish economy grows by 3.3 percent in 2026, growth will rise to 4.2 percent in 2027, 4.6 percent in 2028, and 5 percent in 2029.

The table below presents the MTP growth targets, realization estimates (RE), program projections (P), and actual realizations for the 2020-2029 period together. The table also reveals the striking deviations between annual plans and realizations. When we compare past MTPs with realizations, we see that the deviations in growth targets are not as dramatic as those in inflation. In fact, in some years, realizations exceeded expectations. For example, while growth was projected at around 5 percent in 2021, it reached 11.4 percent, and in 2022, a realization very close to the targets was achieved at 5.5 percent.

However, a different trend is noticeable in the subsequent period: While medium-term growth targets are maintained, the date for reaching these targets is constantly being pushed back.

Indeed, the growth target set at 5 percent for 2026 in the 2024-2026 MTP was lowered to 4.5 percent in subsequent programs, then to 3.8 percent, and finally to 3.3 percent. The new MTP, meanwhile, moves the 5 percent growth target to 2029 this time.

This table shows that the assumption that the Turkish economy can grow by around 5 percent in the medium term is maintained; however, it also shows that the economy is struggling to reach this growth path.

Moreover, the real issue is not just how much we grow, but how we grow. Growth based on consumption and imports may produce high rates in the short term; however, it can disrupt the economy's balances through inflation and the current account deficit.

In this respect, it is important that the MTP emphasizes areas such as investment in manufacturing, high value-added production, increasing export capacity, and reducing energy and logistics costs. However, it should not be forgotten that similar targets were also included in past programs.

Therefore, Turkey's need is not just to set new growth targets; it is to question why the expected transformation in productivity, technology, and production capacity has not been realized. The true success of 5 percent growth will be measured by whether this growth creates more production, higher productivity, and higher value-added.

25 THOUSAND DOLLARS PER CAPITA: Are We Getting Richer, or Are the Numbers Just Growing?

One of the most striking targets of the new MTP is the rapid rise projected in per capita income. Per capita income, which is 15,325 dollars in 2024, is expected to reach 18,103 dollars in 2025, 20,523 dollars in 2026; and then 22,285 dollars in 2027, 23,419 dollars in 2028, and 24,842 dollars in 2029:

The realization of these targets means a significant leap in Turkey's per capita income in dollar terms. However, to evaluate the rise in the figures as a real increase in prosperity, two critical points must not be overlooked: the exchange rate effect and income distribution.

First, the exchange rate effect. When the GDP estimates in TL and dollars in the MTP are evaluated together, an implicit average dollar exchange rate of approximately 56.05 TL for 2027, 63.69 TL for 2028, and 68.82 TL for 2029 emerges. Therefore, the rise in per capita income in dollar terms depends not only on production and productivity growth but also on the real value of the TL.

Second, and perhaps more importantly, income distribution. Because per capita income is an average; a rise in the average does not mean that the entire society has become richer to the same extent. If the purchasing power of wage earners, retirees, and low- and middle-income households does not increase to the same extent while national income is rising, it means that improvements in macroeconomic indicators are not sufficiently reflected in daily life.

For this reason, the real question is more comprehensive than whether Turkey can approach 25 thousand dollars in per capita income: To what extent, in what measure, and how fairly will the increasing national income be reflected in society?

Because true prosperity is measured not only by the rise in per capita income in dollar terms, but by the increase in people's purchasing power, standard of living, and their share of the national income. The real test is how much the enrichment in the figures will be reflected in the kitchen, the dining table, and the lives of broad segments of society.

INFLATION: The MTP's Biggest Trust Test

The biggest disconnect between past MTP targets and realizations has undoubtedly occurred in inflation.

While 6 percent inflation was projected for 2021 in the 2020-2022 MTP, the realization was 36.1 percent. While the 2022 target was again 6 percent in the 2021-2023 MTP, inflation rose to 64.3 percent. While 8 percent was targeted for 2023 in the 2022-2024 MTP, the realization was 64.8 percent; and while 13.8 percent was projected for 2024 in the 2023-2025 MTP, the realization was 44.4 percent.

These are not forecasting errors of a few points; they are deviations that reach several times the targets in one of the most fundamental indicators of the economy.

The new MTP projects that inflation, which is 30.9 percent in 2025, will fall to 28.4 percent in 2026, 21 percent in 2027, 13.5 percent in 2028, and 9 percent in 2029. However, the truly striking picture emerges when compared with the previous program.

Inflation, which was projected at 16 percent for 2026 last year, has been revised to 28.4 percent today. More strikingly, the single-digit inflation target set at 9 percent for 2027 has been raised to 21 percent today. Thus, the goal of reaching single-digit inflation has been postponed from 2027 to 2029.

There is no doubt that global and regional developments, energy and commodity prices, and geopolitical risks have played a role in these deviations. However, it is not enough to explain why inflation targets in Turkey have systematically failed for years solely by external conditions.

Because credibility in the fight against inflation can be achieved not by announcing a new target every year, but by revealing why previous targets were not met and convincingly showing with which policies the new targets will be achieved.

Moreover, Turkey's price stability problem is not a narrow issue that can be solved only with interest rates. Many elements, from food supply to energy costs, from the rental and housing market to production costs, and from expectations to pricing behaviors, need to be addressed with simultaneous and consistent policies.

Ultimately, permanent success in inflation is not just about lowering the annual rate; it is about households and businesses believing again that prices will be more predictable in the future. Because the way to anchor expectations is not just by setting targets, but by building trust in those targets and the economic policies that support them.

UNEMPLOYMENT IS FALLING: But What About the Quality of Employment?

Unemployment presents a more positive picture compared to other macroeconomic indicators in terms of MTP targets. However, we must not ignore that this is narrowly defined unemployment, and the broadly defined unemployment rate is far beyond this.

In past programs, the unemployment rate often turned out to be lower than projected. Indeed, despite forecasts of over 10 percent in 2024, unemployment fell to 8.7 percent; and it was 8.3 percent in 2025. The new MTP projects that this trend will continue, with the unemployment rate falling to 8.1 percent in 2026, 8 percent in 2027, 7.8 percent in 2028, and 7.6 percent in 2029. It is also targeted that employment will increase by an average of approximately 711 thousand people per year during the program period.

This performance must be acknowledged. However, a decrease in the narrowly defined unemployment rate does not mean that the entire labor market has improved.

The labor force participation rate, idle labor force, youth and female employment, the purchasing power of wages, and the quality of jobs created are just as important as the unemployment rate. Because the issue is not just for people to have a job; it is for them to work in productive, secure jobs that provide enough income to live a humane life.

It is important in this respect that the new MTP takes into account the effects of green and digital transformation on the labor market and develops policies for changing skill needs. However, success here will also be measured not by announcing new strategies, but by the extent to which they are implemented.

Therefore, the fundamental employment question of the coming period will no longer be just "How many people are working?" The real question will increasingly be: "With what skills, at what wages, and in what quality of jobs are we working?"

EXCHANGE RATE: The MTP's Invisible Critical Assumption

The MTP does not announce a direct exchange rate target. However, the implicit average exchange rate, calculated from national income estimates in TL and dollars, constitutes one of the important assumptions behind the program.

Past MTPs have also witnessed serious deviations in this area. For example, while the implicit dollar exchange rate calculated in some programs for 2021 was in the 6-8 TL range, the annual average exchange rate was approximately 8.98 TL. In 2022, against assumptions of around 7-9 TL, the realization rose to 16.57 TL, and in 2023, against calculations of around 8-10 TL, it rose to 23.49 TL. In 2024, an annual average exchange rate of 32.83 TL was realized, well above the values derived from previous programs.

When the GDP estimates in TL and dollars in the new MTP are evaluated together, the annual average dollar exchange rate is calculated as approximately 56.05 TL for 2027, 63.69 TL for 2028, and 68.83 TL for 2029. These are not direct exchange rate targets; they are implicit values derived from the program's macroeconomic aggregates.

However, past deviations require this path to be evaluated carefully. Because the Turkish economy's need for external financing continues. Global interest rates, capital movements, geopolitical developments, and changes in risk perception can create significant fluctuations on the TL. A sharp movement in the exchange rate can affect many of the MTP's targets simultaneously, from inflation to the current account deficit, and from growth to budget balances.

On the other side of the coin is the real value of the TL. If the exchange rate increase remains below domestic price increases for a long time, it may lead to a real appreciation of the TL. This situation may support the fight against inflation in the short term and raise national income and per capita income figures in dollar terms; however, it may create pressure on the exporter's competitiveness, import propensity, and current account balance.

Indeed, the MTP also anticipates that the floating exchange rate regime will be maintained and that the exchange rate will be determined by market conditions, except for excessive volatility. Therefore, it would be misleading to evaluate the strong dollar-based rise in per capita income independently of exchange rate policy.

Ultimately, a country's true wealth does not stem from the level of its currency against the dollar, but from its production capacity, productivity, technological strength, and the value-added it creates. Exchange rate stability is important; but it cannot replace permanent prosperity.

CURRENT ACCOUNT DEFICIT: Is Vulnerability Decreasing as Figures Improve?

The current account balance is also one of the areas where MTP forecasts have changed significantly. The current account deficit, which was projected at 1.3 percent of national income for 2026 last year, has been raised to 2.6 percent in the new MTP. It is targeted that this deficit, which corresponds to approximately 47.5 billion dollars, will fall to 1.9 percent in 2027, 1.8 percent in 2028, and 1.6 percent in 2029.

The program points to the increase in energy prices, weakness in external demand, and some methodological changes for the deterioration in 2026. These are important factors. However, the real problem is more structural: Turkey's current account balance is still highly dependent on energy prices, external demand, and imported inputs.

As long as the production structure of the Turkish economy remains dependent on imported energy and intermediate goods, the improvement in the current account deficit will continue to be sensitive to global conditions. An increase in energy prices, a weakening in external demand, or sharp movements in the exchange rate can quickly disrupt the balances again.

For this reason, reducing the current account deficit to 1.6 percent in 2029 is undoubtedly a positive target. However, the real issue is not so much reaching this rate as whether the improvement will be permanent and sustainable.

The way to achieve this is not just through more exports; it is through high-tech and high value-added production, reducing energy dependence, and lowering the share of imported inputs in production.

Because permanent success in the external balance should be measured not only by how much we export, but by how much of the product we export we produce in our own economy. The key to permanently reducing the current account deficit is to increase the domestic value-added of exports while increasing exports.

FISCAL POLICY: Who Will Pay the Bill for Fiscal Discipline?

One of the primary priorities of the new MTP is to strengthen fiscal discipline. It is targeted that the ratio of the central government budget deficit to national income will fall from 3.5 percent in 2027 to 3.1 percent in 2028, and to 2.8 percent in 2029; and that the primary surplus will rise to 0.6 percent by the end of the period.

These targets are important in terms of public finance. However, fiscal discipline should be evaluated not only by how much the budget deficit is reduced, but also by how and through whom this improvement is achieved.

Indeed, the total tax burden, including social security premiums, is projected to rise from 24.8 percent of GDP in 2027 to 25.1 percent in 2029. In a period when the tax burden is increasing, the fundamental question is: How fairly will this burden be shared among different income groups in society?

In a tax system where the weight of indirect taxes is high, the same tax does not create the same effect on households with different income levels. Since low- and middle-income segments allocate a larger portion of their income to consumption, they feel the burden of indirect taxes such as VAT and SCT more heavily. Therefore, it is impossible to think of fiscal discipline and tax justice separately.

The way to permanently reduce the budget deficit does not just involve collecting more revenue. It is necessary to increase efficiency in public spending, reduce inefficient spending areas, fight against the informal economy, broaden the tax base, and make taxation fairer according to the ability to pay.

A strong public finance is possible only with a structure where the budget deficit is not just shrinking, but where public resources are used effectively and the fiscal burden is shared fairly in society. The true success of fiscal discipline will be measured by how much we can protect social justice while balancing the budget.

STRUCTURAL TRANSFORMATION: New Programs, Old Reforms - Where is the Problem?

Among the primary priorities of the new MTP are strengthening growth potential through technological transformation and productivity increases, ensuring price stability, maintaining fiscal discipline, and permanent prosperity growth.

One of the striking aspects of the program is that the heading "economic security and resilience" has become more visible. Pandemics, wars, energy crises, disruptions in supply chains, and rising protectionism in global trade clearly show that economic security can no longer be evaluated only by growth rates.

In this framework, it is important to bring strategic areas to the forefront, from semiconductor and chip technologies to artificial intelligence infrastructure, and from green transformation to supply chain security. Turkey really needs transformation in these areas to increase its production capacity, technological competence, and resilience against external shocks.

However, it is precisely here that past MTP experiences raise a critical question.

Topics such as high technology, R&D, productivity, digitalization, energy independence, education-employment alignment, and high value-added production have appeared in previous programs many times. Therefore, for Turkey, the problem is no longer not knowing what needs to be done, but why we cannot sufficiently implement what is known.

The value of structural reforms is measured not by how many times they are written in programs, but by the extent to which they create concrete results in investment, production, productivity, education, and technology capacity. Otherwise, the fact that the same reforms appear again in every new MTP turns into an indicator of deficiencies in implementation rather than the continuity of targets.

For this reason, the real test of the new MTP is not how ambitious the reform list is, but how much of it will be implemented this time. Because structural transformation is not declared on paper; it happens when the economy's production method, productivity, and competitiveness truly change.

And perhaps the most fundamental question that should be asked is: If we have been rewriting the same structural reforms for years, is the problem in the targets, or in our implementation capacity?

CONCLUSION: The MTP's Real Test is Not Setting Targets, But Achieving Them

The new MTP paints a very ambitious picture of Turkey for 2029: An economy that grows by 5 percent, reduces inflation to 9 percent, creates approximately 2.1 million additional jobs to lower unemployment to 7.6 percent, increases exports of goods and services to 450 billion dollars, national income to over 2.2 trillion dollars, per capita income to approximately 25 thousand dollars, and reduces its current account deficit to 1.6 percent.

Undoubtedly a picture we would all like to see. However, the credibility of the MTP should be evaluated not only by ambitious targets written for the future, but also by the extent to which previously announced targets have been realized. In recent years, there have been large deviations, especially in inflation and exchange rate assumptions; current account deficit forecasts have changed significantly, and the 5 percent growth target has been constantly pushed forward. The most striking example is that inflation, which was projected at 9 percent for 2027 last year, has been revised to 21 percent today, and the single-digit inflation target has been postponed to 2029.

Of course, it is natural for programs to be updated in the face of changing global and national conditions. However, if large deviations in the same indicators are repeated over the years, the issue is no longer just a forecasting error; it is a matter of programming capacity, policy consistency, institutional credibility, and implementation performance.

For this reason, the question we asked last year is even more important today: Is the MTP the real roadmap of the economy, or is it a document where targets that change every year are rewritten?

The answer to this question will not be a new MTP to be announced in 2029, but the extent to which the targets set today are realized in the next three years. For this, a strong harmony must be ensured between monetary and fiscal policies; structural reforms must be implemented not according to the election calendar, but according to the real needs of the economy, and the distance between targets and implementation must be permanently reduced.

Because success in economic programs is not writing good numbers for the future; it is building the reliable, consistent, and sustainable path that will reach those numbers from today.

Ultimately, the fate of the MTP will be determined not by the magnitude of the targets, but by the strength of the implementation. Turkey's need is not so much for new targets as it is for strong institutions, consistent policies, and a determined implementation will that will turn targets into reality. Only then can the MTP turn from a document of targets rewritten every year into a roadmap that truly gives confidence to the economy.