Medium-Term Program Aims for Disinflation and Stability

Disinflation Stability will be the focal point of this article, as we delve into the Medium-Term Program (MTP) for the Turkish economy spanning 2027-2029. The MTP aims to tackle inflation challenges while fostering sustainable growth.

With revised growth forecasts, specific inflation targets, and ambitious plans for tourism and job creation, this program outlines the Turkish government’s strategic vision for economic recovery.

Additionally, we will explore the impacts of external factors, such as the ongoing Middle East conflict, on inflation expectations and overall economic stability, setting the stage for Turkey’s future economic landscape.

Medium-Term Program 2027-2029: Vision for Macroeconomic Stability

The Medium-Term Program 2027-2029 sets Türkiye’s policy timeline at a decisive moment, linking near-term adjustment in 2026 with a clearer three-year path for the economy.

Growth has been revised to 3.3% for 2026, while inflation is expected to end that year at 28.4%, showing how the program responds to a still-fragile environment shaped by external shocks and tighter domestic conditions.

Even so, the framework looks beyond short-term pressure and toward a more durable economic balance that supports production, employment, and investor confidence.

At its core, the MTP rests on two pillars: disinflation and price stability.

It targets inflation of 21% in 2027, 13.5% in 2028, and 9% in 2029, while aiming for 5% growth by 2029 and an unemployment rate of 7.6%.

The program also seeks stronger industrial competitiveness, greener production capacity, 2.1 million new jobs, and tourism revenue of $450 billion.

The MTP anchors Turkey’s economic expectations for the coming decade.

Revised 2026 Growth and Inflation Outlook

Turkey’s 2026 growth forecast has been cut to 3.3% from 3.8% because tighter financial conditions, softer domestic demand, and weaker external momentum are expected to restrain activity, while the 28.4% year-end inflation target reflects persistent price pressures that are still feeding through energy, food, and services costs.

At the same time, the latest revised outlook shows that the conflict in the Middle East has added roughly 7 percentage points to inflation expectations, which makes the starting point for the new Medium-Term Program more challenging.

However, that higher base also frames the 2027-2029 path more clearly, because the government now has to move from disinflation in a low-growth environment toward 21% inflation in 2027, 13.5% in 2028, and 9% in 2029, while gradually lifting confidence, supporting investment, and restoring stronger growth as price stability improves.

Inflation Reduction Pathway, 2027-2029

The Turkish Medium-Term Program sets inflation targets of 21% in 2027, 13.5% in 2028, and 9% in 2029, building a clear disinflation path toward price stability.

1. 2027: 21%, a step that signals tighter policy discipline and a first move to anchor expectations.
2. 2028: 13.5%, which depends on sustained fiscal restraint, better supply conditions, and stronger transmission from interest rates to prices.
3. 2029: 9%, the level that would place inflation much closer to lasting stability and support lower risk premiums.

Meeting this sequence matters because monetary policy only gains traction when households, firms, and markets believe inflation will keep falling, so wage setting, pricing, credit demand, and investment decisions begin to reflect the target path rather than past inflation.

That credibility also helps contain the additional inflation pressure that has already risen by about 7 percentage points because of Middle East tensions, making the OVP targets more than symbolic and turning them into the foundation of durable price-stability confidence.

Geopolitical Shock: Middle East Conflict and Inflation

The Middle East conflict has materially altered Turkey’s inflation path within the Medium-Term Program, because it adds about 7 percentage points to expectations and pushes the 2026 outlook to 28.4 percent.

This jump reflects a faster pass-through from heightened energy costs, disrupted trade flows, and weaker confidence in import pricing, all of which raise costs for producers and consumers alike.

Moreover, the shock complicates disinflation by forcing the economy to absorb external price pressures while monetary restraint is still working through demand.

As a result, the government now targets a slower but clearer glide path, with inflation set to ease to 21 percent in 2027, 13.5 percent in 2028, and 9 percent in 2029. Therefore, the conflict does not merely add volatility; it directly re-anchors near-term pricing behavior and makes the MTP’s stabilization effort more demanding.

2029 Growth and Labor-Market Milestones

By 2029, the Turkish economy is expected to reach 5% growth while unemployment falls to 7.6%, signaling broader income gains and stronger labor demand.

As output expands, households should benefit from more job opportunities, higher wage income, and better consumption confidence, although these gains depend on sustained disinflation and productivity growth.

At the same time, stronger economic activity should lift tax receipts through corporate profits, payrolls, and spending, giving the budget more room to support investment and social priorities.

However, the fiscal payoff will be larger if growth remains balanced and inflation stays under control, because stable prices protect real purchasing power and help the labor market absorb new workers more efficiently.

Tourism Revenue Surge and Job Creation Drive

Türkiye’s Medium-Term Program ties $450 billion tourism-income target to a wider push for stable, export-led growth, because stronger visitor spending can support foreign exchange inflows, relieve pressure on the current account, and help anchor disinflation.

Moreover, tourism acts as a fast channel for regional income, so rising hotel occupancy, higher-value travel, and longer stays can stimulate suppliers across transport, food, retail, and culture.

Recent official momentum, including the record-breaking performance reported by the Ministry of Culture and Tourism, shows why the sector remains central to the growth model.

At the same time, the program links tourism gains with industrial competitiveness and green transformation, so the benefits extend beyond seasonal demand and into productivity, investment, and resilience.

That same logic supports the aim of 2.1 million new jobs, because job creation is essential for turning growth into broader household income and stronger domestic demand.

In addition, tourism can absorb labor quickly through accommodation, logistics, entertainment, and service activities, while manufacturing and green investment can create more durable employment in higher-value segments.

As inflation eases and confidence improves, businesses gain room to hire, train, and expand capacity, which helps reduce unemployment and improve participation.

Therefore, the employment target is not separate from the growth plan; it is the social outcome of a strategy built on productivity, competitiveness, and a more balanced economy.

Strengthening Industry and Advancing Green Transformation

Türkiye’s Medium-Term Program for 2027-2029 links higher production capacity with sharper industrial competitiveness and the green transformation as one integrated resilience strategy.

As firms expand output, they can lower unit costs, improve supply security, and respond faster to external shocks.

At the same time, competitiveness depends on productivity, technology upgrading, export quality, and efficient logistics, not only on volume.

Therefore, the program’s focus on industrial deepening matters because it encourages value-added manufacturing rather than low-margin growth.

Moreover, environmental modernization strengthens this agenda by reducing energy intensity, cutting emissions, and helping industry adapt to global carbon rules.

In this way, sustainability becomes a growth enabler instead of a cost burden.

• incentive schemes that support investment in efficient machinery and cleaner production
• technology upgrading programs that raise productivity and quality
• energy efficiency measures that reduce input costs and carbon exposure

Together, these tools help Türkiye protect its industrial base, widen its competitive edge, and build a more durable growth model for the long term.

Disinflation Stability is at the heart of Turkey’s MTP for 2027-2029. By targeting substantial inflation reductions and promoting economic growth, the program seeks to enhance the country’s resilience and competitiveness, ultimately paving the way for a more stable and prosperous future.