Economist Mahfi Eğilmez: “Never Let Inflation Rise Again Once You’ve Lowered It”
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Renowned Turkish economist Mahfi Eğilmez has issued a stark warning about the fragility of the Turkish economy, citing official data showing slowing growth, rising unemployment, and a deepening reliance on unhealthy economic drivers. “If you’ve managed to bring inflation down once, never allow it to rise again,” he cautioned.
“TÜİK Data Signals Crisis”
In a blog post reacting to the Turkish Statistical Institute’s (TÜİK) newly released data on Q1 2025 GDP and April unemployment, Eğilmez argued that Turkey’s macroeconomic indicators now clearly reflect a crisis. “Inflation is falling, growth is slowing, and unemployment is rising,” he wrote, emphasizing the deteriorating structural health of the economy.
According to TÜİK, Turkey’s GDP grew by 2.0% year-on-year in the first quarter of 2025. However, growth was uneven: industrial output stagnated at 0%, and agriculture contracted by 2%.
“These results indicate that agriculture is in recession, industry is stagnating, exports are weakening, and the economy is staying afloat primarily through construction, services, consumer spending, and imports—all signs of a dangerously unbalanced growth model,” Eğilmez explained.
Unemployment Deepens Beneath the Surface
While the seasonally adjusted unemployment rate stood at 8.6% in April, the broad unemployment rate—which includes discouraged workers and those underemployed—surged to 32.2%.
Eğilmez broke this figure down: “Roughly one-third of the labor force is jobless, but only a quarter of those are actively looking for work. The rest have given up hope entirely and aren’t even trying.”
“Yes, the Cafes Are Full. That’s Exactly What a Crisis Looks Like.”
Responding to popular skepticism over the crisis narrative—based on crowded cafes and busy streets—Eğilmez explained that this kind of consumption actually typifies economic downturns.
“When people no longer believe in the future or see no hope in investing or saving, they spend whatever money they get in cafes and restaurants,” he wrote. “That is the true nature of a crisis: a surge in demand for services, not because people are doing well, but because they’ve abandoned all long-term financial plans.”
Phillips Curve Confirmed by Current Data
Eğilmez referred back to his May 26 analysis of the Phillips Curve, an economic model suggesting a trade-off between inflation and unemployment.
“I recently published an article adapting the Phillips Curve to Turkey, arguing that inflation will fall only as unemployment rises. Today’s data confirms that pattern,” he said.
Turkish Unemployment Rises Sharply in April 2025 as Labor Market Weakens
“Every Solution Has a Price, and Sometimes It’s a Heavy One”
Looking ahead, Eğilmez predicts that the Turkish government will likely pivot away from its inflation-fighting stance to focus once again on short-term growth.
“If I’m right, then the ruling coalition will begin abandoning this half-hearted monetary tightening. This might give a temporary boost to growth, but it will also rekindle inflation,” he warned.
His final message was a firm caution against complacency:
“If you’ve managed to bring inflation back to a normal level, do not let it rise again. Don’t assume you can lower it a second time easily—everything has a cost, and sometimes that cost is severe.”
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