Inflation expected to decline to 27 percent in April: Şimşek

ANKARA

Inflation is likely to exceed the target at the end of 2024 but will decline to 27 percent in April next year, Finance Minister Mehmet Şimşek has said.

In a presentation to lawmakers from the ruling Justice and Development Party (AKP), Şimşek said that the annual inflation rate would be around 43 percent to 44 percent this year, above the government’s target of 41 percent, blaming “high rents.”

“We are expecting the inflation rate to be at 27 percent in April [in 2025],” he added.

In the updated medium-term program, the government forecast that annual inflation will decline to 17.5 percent at the end of next year and drop to 9.7 percent in 2026. The government targets an annual inflation rate of 7 percent in 2027.

Şimşek defended the decision to remove a 25 percent cap on annual rent increase, saying keeping the limit in place would not be “rational.”

But the surge experienced in rent prices in recent months is “not normal,” Şimşek told lawmakers.

He recalled that after the cap was removed, rents could now be increased by up to the 12-month average inflation rate. “This will impact and push up inflation,” Şimşek said.

The annual inflation rate slowed from 51.97 percent in August to 49.38 percent in September, which was above market expectations. The monthly inflation accelerated from 2.47 percent to 2.9 percent.

The 12-month average inflation was 63.5 percent in September.

However, rents rose by 7.62 percent month-on-month last month, bringing the annual increase to 117.4 percent, well above the headline inflation rate.

In the meeting with AKP lawmakers, Şimşek voiced confidence that rent prices will eventually stabilize.

The minister also blamed the ongoing war between Russia and Ukraine as well as halting exports with Israel in the wake of the attacks on Gaza as reasons impacting Turkish inflation.

Minimum wage will be increased in line with inflation, he said in the meeting.

Şimşek also told lawmakers that a company from a Gulf nation wants to invest $50 billion in renewable energy in Türkiye.

 Draft budget for 2025

Meanwhile, talks on the draft budget for 2025 in parliament will kick off with a presentation by the government at the planning and budget commission next week.

Vice President Cevdet Yılmaz unveiled the details of the budget in a press conference, attended by Şimşek, at the presidential complex in Ankara on Oct. 17.

The 2025 budget envisages spending of 14.73 trillion Turkish Lira and revenues of 12.8 trillion lira, Yılmaz said.

The government allocated 1.57 trillion liras for investments in the draft budget for next year, corresponding to some 10.7 percent of the planned expenditure, he added.

Another 1.6 trillion liras have been allocated for defense and 2.1 trillion liras for education, according to the vice president.

The budget forecasts a deficit of 3.1 percent of GDP for next year, he said.