IMF Statement on Turkey: Focus on Inflation Trend – Latest Update
IMF Completes Article 4 Consultation with Turkey
The International Monetary Fund (IMF) recently announced that the Article 4 consultation with Turkey has been completed as of September 27. In their statement, the IMF highlighted the significant change in economic policies that have been implemented in Turkey over the past year, resulting in a tighter general policy stance. The statement commended the tax and spending measures that have been put in place to support fiscal prudence, as well as the commitment to stronger income policies which have helped strengthen credibility.
The IMF noted that these policy changes have led to a reduction in economic imbalances and a revival of confidence in the Turkish economy. They mentioned that headline inflation has decreased due to tightening financial conditions putting pressure on domestic demand. Additionally, both domestic and foreign investors have shown increased interest in TL-denominated assets, leading to improvements in both gross and net reserve positions.
Looking ahead, the IMF stated that they expect inflation to decrease further as authorities continue to make gradual policy adjustments. However, they also highlighted significant risks to these expectations, including wage and price inertia, capital flow reversals, rising global energy prices, and geopolitical tensions.
The statement also pointed out that there are still significant financial and external vulnerabilities in Turkey, emphasizing the importance of continued vigilance and further reforms to maintain financial stability. The IMF recommended a larger and more front-loaded fiscal consolidation to support disinflation efforts and strengthen buffers.
In terms of economic forecasts, the IMF projected that the Turkish economy will grow by 3 percent in 2024, with growth rates of 2.7 percent, 3.2 percent, and 3.4 percent forecasted for the following years. Unemployment rates are expected to gradually decline, with inflation estimated to decrease to 24 percent in 2025 and continue to decline in the years to come.
Overall, the IMF’s statement underscored the importance of coordinated fiscal, monetary, and income policies to anchor inflationary expectations and ensure macroeconomic stability in Turkey. They also called for structural reforms to achieve more inclusive, greener, and higher medium-term growth in the country.
