Istanbul- The Turkish economy will open the year 2025 at a turning point, as it attempts to overcome the crises of past years and restore its balance.
Amid internal challenges and external pressures, the most important question remains: Can Turkey transform these challenges into real opportunities to reformulate its economic path and achieve a sustainable recovery?
A look at 2024
The Turkish economy concluded the year 2024 with record numbers and remarkable economic achievements despite local and global challenges. Turkish President Recep Tayyip Erdogan announced a few days ago that the Turkish economy witnessed continuous growth over 17 quarters, recording a growth rate of 2.1% in the third quarter of the year, while the rate reached Growth during the first nine months was about 3.2%, which reflects the continued positive economic performance.
The Turkish President added that the size of the national economy rose from $1.13 trillion in 2023 to $1.26 trillion in annual terms during the third quarter of 2024. He also expected that per capita income would exceed $15,000 and reach $17,000 by 2025.
Erdogan stressed that the low inflation rate – which reached 44.38% on an annual basis last December – reflects the success of the economic policies implemented.
The foreign trade deficit witnessed a significant decline in 2024, falling from $106.3 billion in 2023 to $82.2 billion, a difference of $24 billion.
Erdogan explained that Turkish exports to the European Union increased by 4.2%, reaching $108.7 billion, while its exports to Organization of Islamic Cooperation countries increased by 6.1%, recording $70.1 billion.
The United Kingdom, the United States, and Saudi Arabia topped the list of countries that increased the value of imports from Turkey during 2024, with increases of 22.2%, 9.9%, and 52%, respectively.
Last month, the Central Bank announced a reduction in the base interest rate by 250 basis points to 47.5% after a long period of fixing the rate at 50%, which was interpreted as an announcement of the beginning of a continuous reduction cycle in view of the Central Bank’s announcement of reducing the number of Monetary Policy Committee meetings from 12 meetings to 8. Year 2025.
Success story
Christian Witowska, director of research for the Eastern Europe, Middle East and Africa region at Deutsche Bank, stressed that the year 2025 will be a “turning point” for the Turkish economy, noting that Turkey has a “wonderful success story” despite the continuing state of economic uncertainty.
In press statements, Wytoska explained that increasing the minimum wage by more than 30% will make controlling inflation more difficult, as every 10% increase in the minimum wage leads to an increase in inflation by about 3 to 3.5%.
In this context, the Turkish Minister of Treasury and Finance, Mehmet Simsek, stressed that the year 2025 will be pivotal for achieving the goals of the economic administration, which seeks to accelerate the reduction of inflation to clearer levels and accelerate the structural reforms necessary to support the economy.
During his speech at the “Assessment 2024 and Expectations 2025” event – organized by the Association of Independent Industrialists and Businessmen last Wednesday – Şimşek explained that the government is moving steadily within its economic program.
He added that the goal for 2025 is to reduce inflation to about 20%, in preparation for reaching single-digit levels in the coming years.
Simsek pointed out that the stability of commodity prices and the decline in global inflation that is expected to continue this year provide a supportive environment for achieving these goals.
He explained that the new trade policies of the next US administration may affect Turkey due to the possible change in the path of Chinese exports.
However, Simsek stressed that the Turkish economic structure has great flexibility, especially since 62% of Turkish exports go to countries that have free trade agreements with Turkey, which makes them less affected by global transformations.
Simsek concluded his speech by emphasizing that structural reforms, achieving financial stability, increasing reserves, and reducing the current account deficit will be the main pillars of sustainable economic growth in 2025.
Economic program
Last September, the Turkish government announced its new economic program for the period between 2025 and 2027. The program set an ambitious goal to reduce the inflation rate to 41.5% by the end of 2025, with an expectation that it will decrease to 9.7% by 2026.
Although the government set, through its economic program, a target of 4% for real GDP growth in 2025, international expectations seemed more conservative, as the International Monetary Fund expected growth at a rate of 2.7% compared to 2.6% expectations of the World Bank, which was identical to the expectations of the Organization for Economic Cooperation and Development.
The program indicated that the ratio of the budget deficit to gross domestic product will reach 3.1% in 2025, which reflects the government’s commitment to achieving a sustainable financial balance.
As for the labor market, the unemployment rate is expected to rise slightly to 9.6% in 2025 as a result of the economic rebalancing process, before gradually decreasing to 9.2% in 2026 and 8.8% by 2027.
Regarding the exchange rate of the dollar against the Turkish lira, the program expected that the average exchange rate of the dollar would reach 42 lira in 2025.
However, estimates from financial institutions were mixed, as the Turkish Central Bank expected the average to reach 43.2 liras, while Credit Agricole gave a more optimistic estimate of 36 liras.
Inflation is a priority
In turn, economic analyst Bilal Baghaish believes that inflation still represents the highest priority for the Turkish economy, as it is directly linked to the sustainability of economic growth and the fair distribution of income.
In his interview with Al Jazeera Net, Baghish points out that the potential trade policies of the United States under the Trump administration – such as imposing high customs duties – may lead to a slight increase in growth and inflation rates at the global level, and global interest rates – especially in the United States – are likely To remain high, causing additional pressure on emerging economies, including Turkey.
As for trade, the researcher draws attention to the problem of different currencies, as Türkiye relies on importing raw materials in dollars and exporting its products in euros.
He believes that changes in the euro-dollar exchange rate negatively affect Turkish export revenues, which increases the complexity of the economic scene.
Baghaish believes that the recent fiscal and monetary policies have yielded positive results, as they succeeded in reducing the current account deficit and increasing monetary reserves, which contributed to the stability of the currency. He pointed out that Turkey has achieved most of the goals of the medium-term economic program, which is an achievement that decision makers can count on.
However, Baghish warns that lowering interest rates could lead to new inflation in demand if not carefully controlled, and stresses that structural reforms must remain a top priority, because success in reducing inflation and stabilizing the economy is not complete without addressing deep structural issues. That hinders productivity.
Baghaish says that the year 2025 may constitute a positive turning point for Turkey if it makes good use of the available opportunities. He believes that the stability of the situation in Syria and the return of refugees may help reduce the social and economic burdens on Turkey, and open the way to redirect resources towards development.
Baghaish concludes that accelerating structural transformation and supporting reform policies will be the key to achieving a sustainable and stable economy in the coming year, making 2025 a real opportunity to reshape the Turkish economic landscape.
