Turkey’s Finance Minister Şimşek Says Inflation Will Fall Below 20% Next Year

Turkey’s Treasury and Finance Minister Mehmet Şimşek said the government expects inflation to drop below 20% in 2026, citing tighter fiscal discipline, structural reforms, and accelerated progress on green and digital transformation. Speaking at a public event in London, Şimşek said Turkey is better positioned to weather global economic uncertainty due to its diversified trade structure and ongoing macroeconomic reforms.

“We Have Achieved Significant Fiscal Discipline”

Speaking at an event hosted by the Union of International Democrats (UID) in London, Şimşek said Turkey had tightened control over public spending.

“Previously, expenditures under the savings circular accounted for 4.6% of the budget. We have brought this down to around 3%. That means nearly a 30% reduction in current expenditures in relative terms,” he said.
“We have now reached the level we envisioned for the budget.”

Şimşek emphasized that strong fiscal discipline would create space for productive investments, infrastructure, and improved public services.

Global Uncertainty and Geoeconomic Fragmentation

Şimşek noted that the world economy is entering a period marked by high uncertainty, trade protectionism and intensifying geostrategic rivalry.

He said major industrial economies — including the U.S., EU, and Japan — have been losing ground in manufacturing, while global trade routes face new risks.

Turkey, he argued, has relative advantages in this environment.

“About 62% of our trade is with countries with which we have free trade agreements, and over 80% is with nations in our close geography. Turkey is resilient to global fractures, though not completely shielded,” he said.

Defense Spending and Strategic Positioning

Pointing to an expected surge in global defense spending — projected to exceed $6 trillion annually in the 2030s — Şimşek said Turkey has an opportunity to strengthen its strategic position.

“If you are prepared, there is no reason for pessimism,” he said.

Green Transition Becoming a National Priority

Šimşek highlighted the economic urgency behind Turkey’s green transition, noting that the country spent $1 trillion on fossil fuel imports over the past 24 years.

“Our total debt is below $550 billion. Yet we paid double that amount for energy imports alone. Renewable transformation is not a choice; it is a necessity,” he said.

He added that Turkey’s renewable energy capacity has expanded rapidly in recent years.

Inflation Outlook: “Below 20% Next Year, Single Digits After”

Şimşek reiterated the government’s commitment to restoring price stability.

“Inflation fell from 64% to 44% last year. It will decline to around 31% by end-2025,” he said.
“Next year, we aim to bring inflation to 20% or below. The following year, we target single digits.”

He added that macroeconomic stability and reforms would accelerate Turkey’s growth potential.

Trade Expansion With the UK and EU

Şimşek said negotiations with the UK on a new, comprehensive free trade agreement were in the final stage.

“It will include not only industrial goods, but also services, public procurement and agriculture,” he said.

He added that Turkey’s trade with the EU is expected to reach $230 billion this year, making Turkey the EU’s fifth-largest trading partner outside the bloc.

Earthquake Reconstruction and Budget Priorities

Şimşek said the government had spent nearly $90 billion on the earthquake zone so far.
Of the 600,000 planned homes, 350,000 have been completed, he added.

He said new social housing projects would help ease rent inflation.

Turkey’s Risk Premium Drops Sharply

Şimşek noted that Turkey’s CDS risk premium had fallen from 700 basis points in mid-2023 to below 240 basis points, signaling improving investor confidence.

“2026 Will Be a Year of Reforms”

Şimşek emphasized that long-term gains must be supported by structural reforms.

“Turkey is working intensively to strengthen democratic standards and the rule of law. As the President said, 2026 will be a reform year,” he said.

He added that Turkey is on track to enter the high-income country group according to World Bank definitions, stressing that deeper reforms would push the country further up the income ladder.

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