Şimşek’s Program Is Cracking Under Its Own Weight
Inflation peaked above 85% in late 2022 and while it has retreated from those extremes, it remains deeply embedded in the daily lives of ordinary Turks. Grocery bills, rent, utility costs — none have returned to anything resembling normal. The central bank’s aggressive rate hikes brought the policy rate to 50%, but transmission to the real economy has been slow and painful. Businesses are squeezed, consumers are exhausted, and the purchasing power lost over the past three years has not come back.
What makes this politically dangerous is the election timeline. Without a war chest of fiscal stimulus to deploy, the ruling party faces a difficult balancing act — continue austerity and risk voter backlash, or loosen the belt and torch whatever credibility the Şimşek program still has with international investors. That is not a comfortable place to be.
💬 Levent KAYIRA Commentary
Ekonomik Gündem Analysis: I spent 15 years watching Turkish banks navigate policy cycles, and this pattern is familiar. When orthodox policy is adopted under crisis pressure rather than genuine conviction, it tends to run out of political runway before it delivers results. The Şimşek program bought Turkey time — foreign reserves recovered, the current account deficit narrowed, and hot money returned. But time was spent, not invested.
The core problem is structural: inflation in Turkey is not purely monetary. Energy import dependency, a weak lira feedback loop, and wage indexation mean that rate hikes alone cannot do the heavy lifting. With the policy rate at 50% and CPI still running in the high 60s, real rates are barely positive — not the deep positive territory needed to genuinely break inflation expectations.
For investors, the signal here is caution on long-duration Turkish assets. If fiscal discipline softens heading into the election cycle, the lira will feel it first. Watch the central bank’s reserve position and the budget deficit trajectory through Q3 2025. Those two numbers will tell you more than any official statement.
Kaynak: Google News Ekonomi