UK Think Tank NIESR: Turkey’s Inflation to End 2025 at 32%, Stay Above 20% Next Year

Senior economist says capital inflows support reserves, but disinflation remains weak

Turkey’s inflation will end this year at around 32%, and is expected to remain above 20% in 2026, according to Ahmet İksan Kaya, Senior Economist at the National Institute of Economic and Social Research (NIESR) — a leading UK-based economic think tank established in 1938.

Speaking live on CNBC-e, Kaya said that unexpectedly strong capital inflows into emerging markets this year helped boost Turkey’s reserves and attracted foreign demand for both Turkish bonds and credits.

“There has been a significant inflow into emerging markets this year, and Turkey benefited through bond and credit inflows,” Kaya said. “These inflows supported reserve accumulation, but inflation has not declined as expected.”

TCMB focused on FX and interest rates

Kaya noted that the Turkish central bank (TCMB) has been forced to prioritize foreign exchange stability and interest rates:

“The last two years have shown that focusing only on the exchange rate and interest rates is not enough to fight inflation.”

He also commented on the global environment:

• The U.S. dollar has started to strengthen again.

• Real appreciation of the Turkish lira may continue unless policy shifts.

• Increasing FX reserves play a critical role in stabilizing the currency.

Global risks could spill over to Turkey

Kaya warned that global market volatility remains a key risk for emerging markets, including Turkey:

“If restrictions are introduced on rare earth elements, that would have negative consequences. There are concerns of a bubble in AI stocks. Bond markets have not yet stabilized — if turbulence returns, everyone will be affected, including Turkey.”