Prof. Esfender Korkmaz: Türkiye Could Resolve Inflation and FX Crisis in Six Months

According to Prof. Esfender Korkmaz, Türkiye’s persistent inflation and currency instability are not destined to last for years. With the right policy mix, both issues could be resolved within six months. However, he argues that the current policy framework makes such a rapid adjustment unlikely.

Global institutions revise Türkiye outlook upward

International ratings agency S&P Global has raised its 2026 inflation forecast for Türkiye to 28.9%, up from 23.4%. The agency expects growth of 3.4% and forecasts the year-end USD/TRY rate at 48.50.

Meanwhile, the OECD’s March 2026 report highlighted that geopolitical tensions and rising oil prices will push global inflation higher and weigh on growth. Still, the increase in global inflation is expected to remain limited, rising from 3.1% in 2025 to 4% in 2026.

In contrast, OECD estimates Türkiye’s inflation at 26.7%, underscoring the country’s sharp divergence from global trends.

“The cost of one policy mistake will last eight years”

According to projections by S&P and the OECD, Türkiye’s inflation, interest rate, and currency imbalances will normalize only gradually over the next four years.

Korkmaz argues this reflects the long-term consequences of policy errors made in 2021:

“Türkiye will bear the economic and human cost of a single mistake for roughly eight years.”

He highlights “human cost” primarily in terms of brain drain.

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Warning of structurally high inflation

Korkmaz cautions that if current structural and political issues persist, inflation could become entrenched above 20%.

In such a scenario, Türkiye would face not only persistent inflation but also renewed currency crises driven by external imbalances.

“A six-month solution is possible”

Korkmaz insists that Türkiye’s current crisis is solvable in a short timeframe—provided a comprehensive policy shift is implemented.

Key measures include:

• Entering an IMF stand-by agreement
• Re-establishing the EU anchor
• Abandoning populist economic policies
• Strengthening rule of law and institutional credibility
• Implementing structural reforms

Under these conditions, he argues, inflation and currency pressures could be resolved within six months.

Policy framework remains the main obstacle

However, Korkmaz emphasizes that the current policy stance makes such reforms unlikely.

Key constraints include:

• Reluctance to acknowledge the existence of an economic crisis
• Ideological resistance to IMF cooperation
• Deterioration in relations with EU institutions

Political developments weigh on investor confidence

Recent political developments have also affected economic sentiment.

European Union reports have criticized interventions in local governments and legal processes, which in turn have:

• Reduced foreign direct investment inflows
• Weakened investor confidence

Korkmaz notes that approximately $60 billion in hot money outflows occurred during the week when Istanbul Mayor Ekrem İmamoğlu was detained.

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Populist policies strain fiscal discipline

Korkmaz also points to fiscal policy challenges:

• Expansion of social transfers
• Politically driven credit allocation to SMEs
• Continued high public spending

These policies, he argues, complicate efforts to restore macroeconomic stability.

Deep-rooted structural weaknesses

Türkiye’s economic challenges are compounded by structural issues, including:

• Weak rule of law and institutional trust
• Erosion in public institutions and education system
• Fragile macroeconomic structure
• Oligopolistic market conditions
• Import-dependent production model
• Low productivity and industrial capacity

Without addressing these issues, sustainable recovery remains unlikely.

Governance structure under scrutiny

Korkmaz also criticizes the concentration of political power under the presidential system, arguing that combining executive authority with party leadership undermines institutional balance.

He further notes that ideological pressures on the education system risk weakening long-term economic development.

Dependence on hot money increases fragility

Türkiye’s reliance on short-term capital inflows continues to expose the economy to volatility.

At the same time, public procurement practices and privatization policies have reinforced oligopolistic market structures, limiting competition.

Conclusion: Policy shift remains key

Korkmaz concludes that Türkiye’s economic challenges are manageable—but only with a fundamental shift in policy approach.

Without such a change:

• Inflation could remain structurally high
• Currency pressures may intensify
• Economic recovery could take longer than projected

“Without a new policy framework, the adjustment period will extend well beyond four years.”