Türkiye May Beat Inflation Forecasts If Oil Prices Stay Below $65, Says Şimşek
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Türkiye could experience lower-than-expected inflation and a narrower current account deficit in 2025 if global oil prices remain below $65 a barrel, according to Treasury and Finance Minister Mehmet Şimşek.
The comments come as Brent crude and U.S. West Texas Intermediate (WTI) continue their downward trajectory amid escalating global trade tensions. On Friday, Brent stood at $63.71 per barrel, while WTI hovered at $60.45, marking a second straight week of losses for both benchmarks.
“If the current trend persists, inflation could fall 1 to 1.6 percentage points below projections,” Şimşek stated at an OECD economic forum in Istanbul.
Türkiye's annual inflation slowed to 38.1% in March, the lowest since December 2022, and a significant improvement from the 75% peak in May 2024.
Macroeconomic Gains Tied to Global Oil Market Volatility
Şimşek also noted that sustained low oil prices could reduce Türkiye’s current account deficit to under 1.5% of GDP, below the government’s 2% target in its medium-term economic program.
The Turkish central bank currently forecasts year-end inflation at 24%, but that could be revised downward if crude prices remain depressed due to a global trade slowdown.
The decline in oil prices follows aggressive tariff escalations between the United States and China. In response to President Donald Trump’s decision to raise U.S. tariffs to 145%, China announced a 125% retaliatory tariff, effective immediately.
These measures have unnerved markets, with both Brent and WTI losing around 11% last week. Brent briefly dipped below $60, marking its lowest level since February 2021.
Trade War Sparks Concerns Over Global Growth and Oil Demand
The U.S.-China trade dispute is expected to curb global trade volumes and reduce energy demand, analysts warn. The U.S. Energy Information Administration (EIA) cut its 2025 oil price forecast to $63.88, down from $70.68, citing increased OPEC+ production and trade uncertainties.
Oil demand growth has also been revised down to 0.9 million barrels per day, significantly lower than previous estimates.
“We expect oil prices to remain under pressure as the market reacts to escalating trade tensions,” said Daniel Hynes, senior strategist at ANZ Bank.
Economists argue that developing countries could be hit hardest by the ripple effects of a prolonged tariff war. A 1% drop in oil consumption is expected if global GDP growth dips below 3%.
Türkiye’s Fiscal Discipline Remains Firm Despite Market Volatility
Back in Istanbul, Şimşek addressed growing market uncertainty, acknowledging some downside risks to Türkiye’s economic growth and budget performance. However, he emphasized the government’s commitment to fiscal discipline and spending control.
“One thing we can assure you is that spending controls will be there. We will deliver on commitments and bring inflation down. That’s the key message,” Şimşek said.
Despite global headwinds, Türkiye’s economic policymakers remain optimistic that disciplined fiscal policy and favorable oil price dynamics can accelerate disinflation and improve external balances.
