OECD Highlights Türkiye’s Inflation Decline and Growth Resilience

The Organisation for Economic Co-operation and Development (OECD) has praised Türkiye’s recent strides in tackling inflation and narrowing its current account deficit, while stressing the importance of maintaining a course of disciplined macroeconomic policies and ambitious structural reforms for long-term stability.

In its 2025 Economic Survey of Türkiye, the OECD projects GDP growth of 3.1% in 2025 and 3.9% in 2026, with inflation expected to decline to 17% by the end of that period—continuing the downward trend from a high of 75% in May 2023.

“Maintaining tight monetary policy and fiscal discipline will be key to ensuring sustainable economic convergence and continued inflation reduction,” said OECD Secretary-General Mathias Cormann during the report’s presentation in Istanbul, alongside Treasury and Finance Minister Mehmet Şimşek.

Inflation Eases, Policy Discipline Gains Momentum

Since the May 2023 elections, Türkiye has shifted toward orthodox economic policies, focusing on tight monetary policy to bring inflation under control. The central bank raised its benchmark rate by a cumulative 4,150 basis points, before lowering it to 42.5% through gradual cuts in the last three meetings.

According to the OECD:

• Annual inflation dropped to 38.1% in March 2025, the lowest since 2022.

• Inflation is projected to fall to 31.4% by the end of 2025, and 17% by 2026.

• The central bank’s own forecast for year-end 2025 stands at 24%.

However, the OECD cautioned that restrictive financial conditions could dampen household consumption and overall economic activity in the short term.

Debt Low, Reforms Needed for Sustainable Growth

The report underscores that Türkiye’s public debt-to-GDP ratio remains relatively low, while the budget deficit is projected to narrow to 2.6% by 2026. Meanwhile, the current account deficit is expected to fall to 2% of GDP in 2025, as outlined in Türkiye’s Medium-Term Program.

Over the past decade, Türkiye has posted one of the highest average GDP growth rates in the OECD, at 4.9% annually. This has led to:

• A quadrupling of living standards,

• A rise in labor force participation among those aged 15–64 from 50% in 2005 to 60% in 2023,

• A halving of the national poverty rate.

Structural Bottlenecks Persist in Services and Innovation

The OECD urged Türkiye to address bureaucratic hurdles, particularly in the services sector, which remains among the most regulated in the OECD. Excessive restrictions deter productivity, foreign investment, and export growth.

“Liberalizing professional services and easing foreign ownership limits would unlock business potential and attract foreign direct investment,” the OECD said.

In addition, the report noted that productivity growth is slowing, with the economy remaining centered on medium-tech sectors. To climb up the value chain, Türkiye must:

• Invest in workforce upskilling,

• Enhance R&D and innovation diffusion,

• Boost competitiveness in high-skill manufacturing and services.

Female Labor Participation Remains a Key Challenge

Türkiye still lags behind in women’s labor force participation, the OECD noted. To address this, the organization recommended:

• Expanding access to preschool education,

• Increasing child-related tax benefits,

• Reducing social security burdens on low-income workers.

Such measures would promote job participation, reduce informality, and boost inclusive growth.

Climate Commitments Fall Short Amid Rising Emissions

On the environmental front, the OECD warned that although Türkiye’s current greenhouse gas emissions are relatively low, they are increasing rapidly. The country’s existing policies are inadequate to meet the 2053 net-zero emissions target, highlighting an urgent need for more ambitious climate action.