Güldem Atabay: Mehmet Şimşek’s “Unluckiest Summer” and the Illusion of 2026 Prosperity

Turkey’s Finance Minister Mehmet Şimşek insists the most difficult phase of his economic program is now behind us. Yet, the data tells a different story. In the wake of the March 19 financial turbulence, Şimşek’s policy of aggressive interest rate hikes has deepened the burden on public finances without relieving the pressure on millions of citizens trapped in poverty. His vision of prosperity by 2026 seems disconnected from the lived reality of today.

The Price of High Interest Rates

Following the sharp volatility triggered by the March 19 shock, Minister Şimşek responded with another steep interest rate hike, despite growing fiscal strain caused by interest payments. While the official narrative claims that policy discipline is working, even traditionally pro-government outlets like Yeni Şafak have begun criticizing the interest-heavy approach, voicing discontent on behalf of Anatolian capital interests and small businesses.

Recent economic data has only amplified these concerns. In Q1 2025, Turkey’s industrial sector contracted by 1.8%, while agriculture shrank by 2.0%. The broader labor market remains strained: the broad unemployment rate soared to 32.2%, painting a picture of growing idle capacity and stagnation.

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A Message to Erdoğan — and the Market

On the first business day after the holiday, Şimşek delivered a carefully worded message. Facing mounting criticism from within the AKP’s base, his remarks were part reassurance to President Erdoğan and part sales pitch to financial markets.

According to Şimşek, the worst is now over. The “high interest–strong lira” model adopted since the 2023 elections, he claims, is beginning to bear fruit. By 2026, falling inflation, looser financial conditions, and improved access to credit will unleash a recovery. Small- and medium-sized enterprises, long squeezed by credit bottlenecks, will regain momentum. Uncertainty will fade. Foreign investors will return in droves, enticed by policy predictability and high yields. Growth will pick up, jobs will follow, and everyone will feel the reform dividends.

But much like Justice Minister Yılmaz Tunç’s routine “Turkey is a rule-of-law state” remark following every undemocratic move, Şimşek’s “the program is working” mantra rings increasingly hollow against the daily grind of economic hardship.

The Numbers Say Otherwise

Let’s revisit some recent data from TurkStat that undermines the minister’s optimism:

• Housing costs now dominate household budgets: For the first time in years, food is no longer the biggest household expense in Turkey. Housing and rent now top the list at 26%, compared to food’s 18.1%.

• Low-income households are in crisis: The poorest 20% of Turks spend 38.4% of their budgets on rent and 33.7% on food—leaving just 28% for all other needs. Meanwhile, the richest 20% account for nearly 48% of total consumption.

• Wage erosion continues: As of July, Turkey’s minimum wage stands at TRY 22,104. But the April hunger threshold was TRY 24,035 and the poverty threshold exceeded TRY 78,000. With no inflation adjustment planned for July, nearly 7 million workers—and an estimated 15 million people whose earnings are indexed to the minimum wage—are being left behind.

In essence, the working class has become a tool in the inflation fight. Their incomes are being eroded to suppress demand, with Şimşek promising that relief will arrive—eventually.

Political Risks Undermining Economic Credibility

Şimşek’s narrative of fading uncertainty also collides with the political reality. The Erdoğan government has imprisoned CHP presidential candidate and Istanbul mayor Ekrem İmamoğlu in Silivri and jailed several members of his team. Rumors of a possible trustee appointment to the CHP’s leadership are gaining traction.

Meanwhile, constitutional amendments, local government laws, and electoral reforms planned for this summer are expected to cement Erdoğan’s grip on power. If the government fails to derail the opposition, talk of postponing the next election—currently expected in 2027—is becoming more plausible.

In such a climate, even the most market-friendly rhetoric loses weight. Foreign investors may applaud Şimşek’s technical competence, but domestic credibility is eroding. Promises of 2026 prosperity mean little when millions are barely surviving in 2025.

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