Türkiye targets inflation below 20%, says VP Yilmaz

Turkish Vice President Cevdet Yilmaz announced in a recent address to the Turkish Parliament’s Planning and Budget Commission that the government aims to reduce inflation to below 20% by the end of 2025.

Yilmaz highlighted Türkiye’s economic priorities, emphasizing the importance of long-term social welfare and the strategic opportunity presented by a “non-election period.”

Key highlights from budget commission discussion

• Budget strategy and long-term vision: Yilmaz emphasized that Türkiye’s 2025 budget is designed to support sustainable economic development and prioritize social welfare. Highlighting the rarity of a non-election period, he called on leaders to take advantage of this time to implement lasting economic reforms, stating, “One of our primary goals is to elevate Türkiye from a middle-income to a high-income economy.”
• Inflation and disinflation measures: Yilmaz detailed the government’s phased approach to reducing inflation, with three stages: transition, disinflation, and lasting price stability. He noted that the economy is now in the disinflation phase, with significant progress over the past four months. The government’s target, he confirmed, is to bring inflation below 20% by the end of 2025.
• Earthquake expenditures and borrowing: Yilmaz acknowledged that the rise in national debt and the current account deficit in 2023 stemmed largely from increased spending following Türkiye’s recent earthquake. However, he emphasized that these costs, while significant, do not indicate structural issues in Türkiye’s economy. He anticipated fiscal relief in the medium term as reconstruction costs decrease.

• Medium-term program (MTP): Yilmaz reaffirmed the government’s commitment to the priorities in Türkiye’s annually updated Medium-Term Program, which focuses on digital transformation, green initiatives, and sustainable economic growth to enhance social welfare. He described the MTP as a consistent framework, with annual updates reflecting recent developments.
• Tax reforms for social equity: Addressing tax reform, Yilmaz reviewed changes introduced in 2019 that reduced the income tax burden for lower earners by lowering the base tax rate from 22% to 15%, while increasing the top tax bracket from 35% to 40%. He noted that Türkiye has exempted minimum wage income from taxation, reduced VAT on basic food items to 1%, and eliminated VAT on agricultural feed and fertilizer.