Levent Gürses
The new Medium-Term Programme (OVP) has been announced. According to the OVP plan unveiled by Vice-President Cevdet Yılmaz, the inflation forecast for the end of 2026 stands at 28.4 per cent. Inflation is projected to fall to 21 per cent in 2027, 13.5 per cent in 2028 and 9 per cent in 2029. Consequently, the inflation forecast in the OVP – which charts the country’s three-year economic roadmap – has been revised upwards to 28.4 per cent, representing a deviation of 12.4 percentage points.
The budget deficit-to-GDP ratio is forecast to stand at 3.1 per cent. The programme aims for Turkey to become a central country in logistics corridors and to prioritise R&D investments in advanced technologies.
Furthermore, the OVP includes a massive privatisation programme. Whilst privatisation revenue is expected to reach 105 billion by the end of 2026, a total of 489.5 billion in privatisation revenue is targeted for the 2027–2029 period.
KESK: We will not accept this destructive budget
Confederation of Public Employees Trade Union (KESK) has reacted strongly to the OVP covering the 2027–2029 period, emphasising that the programme will increase income losses for workers and lead to the widespread adoption of precarious and flexible working arrangements. “Both this government’s medium-term and long-term programmes are anti-labour and pro-capital,” said the trade union, calling for a struggle against the programme.
New Party: It has lost its credibility
The New Party criticised the OVP, stating: “With an inflation forecast that has tripled in two years, the programme has lost its credibility.” The report highlighted that interest expenditure in the 2027 budget would exceed capital expenditure by a factor of two, whilst also criticising the “failure to set measurable targets for income distribution” and the fact that “the majority of tax revenue is derived from indirect taxes”.
Mahfi Eğilmez: Will the elections be held in 2027?
Commenting on the OVP, Dr Mahfi Eğilmez, former Undersecretary of the Treasury and economist-author, asks “Will the election be in 2027?” whilst analysing the budget forecasts for the coming year, and writes:
“It is forecast that the budget deficit will widen in 2027, whilst the non-interest surplus will narrow. Moreover, the increase in the budget deficit appears to be higher than what could be explained by interest expenditure alone.
This is due to the forecast that non-interest expenditure — staff costs, current expenditure and investment expenditure — will rise at a rate exceeding inflation.
This represents a slight departure from the general consistency seen in previous years. This is because whilst it might be possible to go to the polls with that budget, bringing inflation down to 21 per cent is highly unlikely.
This picture, of course, does not in itself mean that an election will be held in 2027. However, this divergence in the budget indicators for 2027 raises the question of whether elections will take place in 2027.
In other words, the budget figures in the OVP present a picture that suggests the possibility of an ‘election economy’ for 2027. Whether this will materialise or not will depend on how budget implementation unfolds in the coming period.”
Mahfi Eğilmez: Inflation forecast is realistic
Dr Eğilmez’s comments on the OVP are as follows:
– The OVP forecasts that inflation will stand at 28.4 per cent by the end of this year. This figure is 0.4 percentage points higher than the Central Bank of the Republic of Turkey’s (CBRT) latest forecast of 28 per cent. We therefore consider this forecast to be realistic.
– Interest expenditure is expected to rise by nearly 41 per cent in 2027 compared with 2026. Conversely, the rate of increase is forecast to fall rapidly in subsequent years. Such a development could be made possible by an improvement in the budget balance and the non-interest balance. Indeed, the OVP also forecasts this.
– The balance of trade, however, does not show any significant change compared to previous forecasts. The period is expected to be characterised by a trade deficit of around 100–110 billion dollars.
– One of the most important issues is the relationship between inflation rates and the USD/TL exchange rate. The table indicates that by 2027, the rise in the exchange rate will converge more closely with inflation than in previous years, and by 2028 and 2029, the rise in the exchange rate will reach almost the same level as inflation. – If these inflation forecasts materialise, this adjustment appears positive. However, given that the exchange rate’s adjusted level should be around 65 TL compared to the past three years, it seems highly unlikely that this adjustment will fully offset the past suppression.
Prof. Dr Hayri Kozanoğlu: Yet another OVP lacking credibility
In his article in the BirGün newspaper, Prof. Dr Hayri Kozanoğlu stated that the new OVP once again highlights the government’s failure in economic policy, noting that whilst inflation targets have been raised, austerity measures have been maintained. Emphasising that what is being presented to the public is yet another success story divorced from reality, he said, “When you listen to Cevdet Yılmaz’s statements, you get the feeling that you are being taken for a ride.”
The anti-inflation programme has been shelved
Prof. Dr Hayri Kozanoğlu noted that, with the OVP, the anti-inflation programme had been shelved, writing:
“Upon examining the OVP, what immediately stands out is that the target to reduce inflation—which had been announced as a ‘disinflation’ programme—has been shelved. The 16 per cent inflation rate projected for 2026 has been raised to 28.4 per cent – slightly above even the 28 per cent update in the latest Central Bank Inflation Report. But more importantly, whilst last year’s OVP projected a 16 per cent inflation rate for the following year – that is, 2026 – this time the text includes a figure of 21 per cent for the year after that, 2027, which is 5 percentage points higher. It is perhaps hardly worth mentioning that this rate is a full 12 percentage points above the 9 per cent – a single-digit target – set for 2027 in the previous OVP.
Let us assume, for a moment, that all the targets in this OVP are met. A 4.1 per cent growth rate in 2027 would indicate a performance below potential; 21 per cent inflation would represent a rate above even Turkey’s own averages; and an 8.1 per cent unemployment rate would point to a level well above global averages.”
‘Putting all the best-case scenarios together…’
Murat Muratoğlu, a columnist for Nefes newspaper, said the following in his article on the OVP covering the 2027–2029 period:
“Once again, they’ve taken all the best-case scenarios as if they were all going to happen at the same time and presented them as a programme. Oil prices will fall… Tourists will spend more money… The dollar will rise, but at a slower rate than inflation… Consumption will accelerate, investment will accelerate, the economy will grow, and jobs will be created for millions of people…
Right… The budget will run a deficit for a while longer, but even the judge’s daughter has her faults… Along with all this, inflation will also fall from 28.4 per cent to 9 per cent. This is the ‘Wishing Stone’ programme – bringing news of happiness to eyes that have almost forgotten how to smile… My sorrows have piled up; they won’t fit inside me…‘
’With spending rising by 38 per cent, how will inflation fall to 21 per cent?”
Prof. Dr Hakan Kara, a lecturer at Bilkent University and former chief economist at the CBRT, outlined his approach by posing a question about the Medium-Term Programme (OVP) on social media: “How is inflation supposed to fall to 21 per cent when non-interest budget expenditure is set to rise by 38.4 per cent in 2027?”
Prof. Dr. Şenol Babuşçu, former Deputy General Manager of Ziraat Bank and a lecturer at Başkent University, posed the following question:
“The OVP forecasts that, from 2027 onwards, the exchange rate and inflation will move in tandem. Although the exchange rate has lagged behind inflation in recent years, inflation has not been brought down sufficiently. So if the exchange rate rises as much as inflation, how will the targeted disinflation be achieved?”
Prof. Dr Selva Demiralp: The assumption that inflation will fall without cost-pass-through
Prof. Dr Selva Demiralp, a former Fed economist and lecturer at Koç University, also wrote as follows:
“The OVP may not serve as a prophecy, but it very clearly reveals what the government is willing to sacrifice – and what it is not – within a year. The sub-headings of my OVP assessment are:
* Although many forecasts in the OVP fluctuate from year to year, the growth targets never change. Why?
* Whilst growth remains unchanged, inflation is always falling. How?
* There is an (implicit) assumption that the controlled exchange rate policy will be abandoned as of 2027. Has this assumption been reflected in the inflation forecasts?
* The assumption that inflation will fall without bearing the cost of the ‘bitter pill’ is the most critical mistake that is repeated every year.”
Foreign banks’ average USD/TL exchange rate forecast for mid-2027 is 56.4 TL
Following the announcement of the OVP, USD/TL expectations have once again come to the fore. Whilst foreign institutions’ forecasts for the end of 2026 range from 49.07 to 54.01 TL, the highest forecast for the second quarter of 2027—at 63.27 TL—came from Danske Bank. The average of 11 banks’ forecasts for the dollar/TL exchange rate in mid-2027 stood at 56.37 TL.
Foreign banks’ dollar/TL exchange rate forecasts from the end of 2026 to the second quarter of 2027 are as follows:
ING: 55.30–57.60
SEB: 53.00–56.67
Danske Bank: 54.01–63.27
BBVA: 51.80–57.01
Swedbank: 50–55
Mizuho Bank: 51–55
Nomura: 51–54
Standard Chartered: 50.90–55.10
Commerzbank: 53–55
JP Morgan: 51.20–54.98
Citigroup: 51.97–56.55
The dollar exchange rate is set to rise by 19.6 per cent in 2027
According to the OVP, the expected annual average dollar exchange rates are as follows:
2026 – 46.87, growth rate 18.7 percent
2027 – 56.05, growth rate 19.6 percent
2028 – 63.69, growth rate 13.6 percent
2029 – 68.83, growth rate 8.1 percent
Other key news of the week is as follows:
Contraction in industry continues: Production has been falling for three months
Turkey’s industrial production recorded a decline in July on both a monthly and annual basis. Seasonally and calendar-adjusted production fell by 1 per cent month-on-month, whilst the annual decline in the calendar-adjusted index stood at 0.3 per cent.
Experts noted that the slowdown in industrial production confirms the moderate cooling in domestic demand and manufacturing.
Central Bank announcement: No change to interest rates
The Monetary Policy Committee of the Central Bank of the Republic of Turkey kept the one-week repo auction rate – the policy rate – unchanged at 37 per cent. The Committee also kept the Central Bank’s overnight lending rate at 40 per cent and the overnight borrowing rate at 35.5 per cent.
An interest rate cut may be on the cards at the October meeting
Commenting on the Central Bank’s decision, Prof. Dr Emre Alkin emphasised that whilst the bank was keen to cut rates, current conditions did not permit it, stating: “The Central Bank said, ‘I’m keen, but I have no reason to.’ Interest rates haven’t changed… They might fall before the year is out.”
Economist İris Cibre also pointed out that, provided external supply shocks do not feed through to prices, the door might be ajar for an interest rate cut at the October meeting.
Bridges and motorways included in privatisation scheme
The 15 July Martyrs’ and Fatih Sultan Mehmet (FSM) bridges, along with motorways owned by the General Directorate of Highways (KGM), have also been included in the privatisation scheme. According to the T24 news website, whilst experts argue that a significant portion of the bridges and motorways included in the privatisation scheme have recouped their construction costs over the years, they point out that the expected revenue from the sale will not be sufficient to close the budget deficit. It is noted that the process could involve the transfer of operating rights for approximately 30 years.
Sources close to the privatisation process stated that the French, in particular, have taken a keen interest in the privatisation of bridges, motorways and ring roads, and have held talks in Ankara and met with officials. It is also reported that, alongside the French, certain Japanese and South Korean companies are interested in the privatisation of bridges and motorways.
The sources noted that IC İçtaş, Limak, Kalyon and Cengiz Holding are the leading potential investors in the bridge and motorway privatisation, adding, “It would come as no surprise if these groups were to participate in the privatisation process.”
Yol-İş is preparing for nationwide action
The Yol-İş Trade Union is preparing for a phased series of nationwide protests, starting next week, against the transfer of the two Bosphorus bridges and certain motorways operated by the General Directorate of Highways (KGM) to private operators for up to 30 years. The union, which has 46,653 members, has stated that the privatisations will affect not only public revenue but also approximately 2,000 Highways Authority workers.
The cost to the public will be far higher than 21 billion dollars
The Deputy Group Leader of the New Party made the following observations regarding the privatisation of bridges and motorways:
• The President has ordered the sale of all these motorways and ring roads, which are state-owned and generate at least 700 million dollars annually, by the end of 2031. These motorways and bridges are to be sold on 30-year leases.
• Revenue of 400 million dollars (18 trillion lira) was generated from these bridges and motorways in the first seven months of this year. This annual figure of 700 million dollars amounts to 21 billion dollars over 30 years. How many billions of dollars will the government take, whilst ceding such a large share of the revenue to the private sector?
• Moreover, whilst citizens pay 59 lira for a car crossing the Fatih Sultan Mehmet Bridge, which is operated by the state, they pay 1,170 lira for a car crossing the Osman Gazi Bridge, which is operated by the private sector – and the state is paying an equivalent amount from public funds.
• In addition to the revenue the state will forgo by selling these bridges and motorways, the affiliated domestic or foreign capital that purchases them will increase tolls from day one, bringing them up to the level of other bridges and motorways. Consequently, the cost of this sale to the public will be far higher than 21 billion dollars.
• Selling these bridges and motorways, which generate 700 million dollars a year in tolls, and spending the proceeds to ensure the AK Party wins the forthcoming general election is a betrayal of this country and this nation.
Tensions in the Middle East have risen; oil has once again surpassed 100 dollars
Escalating tensions in the Middle East have pushed oil prices back above 100 dollars. As of the morning of Friday 11 September, the price per barrel of Brent crude for November delivery stood at 105.90 dollars, having risen by 10.02 per cent on a weekly basis. On Thursday 10 September, the price per barrel of Brent crude for November delivery had risen above 109 dollars.
The Iranian Revolutionary Guard Corps announced that, in response to US attacks on Iranian oil tankers, two US Navy warships – the USS Delbert D. Black (DDG-119) and the USS John Paul Jones (DDG-53) – had been targeted with ballistic missiles. US Secretary of State Marco Rubio stated that if Iran continued to target US Navy vessels, it would “lose its tankers”.
Analysts suggest that the reciprocal attacks could lead to further disruptions in the flow of oil from the Persian Gulf for some time to come.
Expectations of steep price rises for airfares
The rise in oil prices has led to expectations of “significant” price rises for airfares. Ryanair CEO Michael O’Leary warned that rising jet fuel costs could push financially vulnerable airlines across Europe towards the risk of bankruptcy.
Household debt from loans and credit cards has reached 7.3 trillion lira
Borrowing has shown no signs of slowing due to high inflation and rising living costs. Citizens’ personal loan and credit card debt to banks and financial institutions rose by approximately 130 billion lira in the week of 21–28 August, reaching 7 trillion 284 billion lira. The total increase in debt since the start of the year has reached 1 trillion 425 billion lira.
Credit cards have exploded: Turkey leads Europe!
Low wages and rising living costs have driven citizens towards credit cards, whilst Turkey has risen to the top of the European rankings in terms of the number of credit cards. According to Mastercard data, there are 142 million credit cards in the country, whilst the total value of card payments reached 24.1 trillion lira in 2025.
Non-performing loans reached 862 billion lira
Whilst banks’ lending volume grew, the rise in non-performing loans was notable. In the week ending 4 September, the lending volume rose to 28.1 trillion lira, whilst non-performing loans rose to 862.2 billion lira.
Central Bank reserves fell by 4 billion dollars
The Central Bank’s official reserve assets fell by 2.1 per cent compared with the previous week, dropping to 184.2 billion dollars in the week ending 4 September. Total reserves fell by 3 billion 951 million dollars in the week ending 4 September, reaching 84 billion 247 million dollars.
Gold reserves fell by 3 billion 248 million dollars, dropping from 117 billion 89 million dollars to 113 billion 841 million dollars.
DİSK: Workers’ eight-month loss totals 1.8 trillion lira
Confederation of Progressive Trade Unions of Turkey (DİSK) General President Çerkezoğlu unveiled the Wage Loss Report, prepared by DİSK Research Centre (DİSK-AR), in front of the Ministry of Labour and Social Security. Çerkezoğlu stated that the total loss to workers’ wages caused by inflation and taxes in the first eight months of 2026 amounted to at least 1 trillion 863 billion lira.
“There has been a significant surge in oil imports from the US”
Retired Ambassador Engin Solakoğlu wrote in an article on the www.haber.sol.org.tr website that there had been a significant increase in the volume of oil Turkey imported from the US in the first half of the year, whilst lower prices were paid for Russian oil: Solakoğlu’s article reads as follows: “In the first six months of this year, there was a significant surge in the volume of oil Turkey imported from the US. (…) Yet Turkey was sourcing oil from Russia at a price far lower than that on the international markets. Whilst a barrel of Brent crude fluctuates between 80 and 90 US dollars, and the average price of Russian Urals crude lies in the 50–60 dollar range, Turkey was paying approximately 38 US dollars per barrel for the oil it imported from Russia.”
Volkswagen in a tight spot; challenging rescue plan unveiled
It is reported that, following months of negotiations, the Volkswagen Supervisory Board has approved the management board’s cost-cutting package. Accordingly, approximately 95 per cent of the rescue plan will be implemented. According to a post by Alper Üçok on X, adjustments are being made to certain clauses to enable the package’s approval.
Up to 60,000 jobs, including those in senior management, are at risk; of these, 47,200 will be made redundant in the first phase, with a further 13,000 to be cut to close the general expenditure shortfall. The restructuring will cost at least 6.6 billion euros, rising to 10 billion euros in the worst-case scenario.
VW is forced to reduce its excess production capacity of over 500,000 vehicles in Europe. Factories will be affected by this situation. Volkswagen’s plant in Osnabrück will be the first car factory in Germany to be repurposed as a defence industry facility.
Europe’s natural gas stocks at their lowest level in 15 years
As Europe faces an energy crisis for the second time in four years, the fill level of natural gas storage facilities has fallen to its lowest level in 15 years. According to a report in the Ekonomi newspaper, whilst current stocks are said to be sufficient only for a mild winter, it is forecast that should the Strait of Hormuz remain closed, storage levels could fall to as low as 14 per cent by next April.
Meanwhile, with winter yet to arrive and storage facilities not yet fully stocked, natural gas prices in Europe have risen above 80 €/megawatt-hour for the first time since 2023. With the price of Brent crude also rising above $100 per barrel, risks are mounting as persistently high energy prices threaten to fuel inflation and drag Europe into a wider crisis…
“AI could bring about the end of humanity by 2030”
The latest statement by a former Anthropic researcher has sparked debate. Jacob Coxon, a researcher at Anthropic, emphasised that artificial intelligence will take steps to halt humanity, and that the probability of humanity’s extinction is over 10 per cent.
The researcher, who works at the heart of AI development, stated: “They are racing towards self-improving superintelligence and gambling with our lives.” Coxon also said that those developing AI genuinely believe this technology could bring about the end of humanity by 2030.
Selling pressure on US and European stock markets: Eyes on the Middle East
Escalating tensions in the Middle East and concerns over energy supply have increased selling pressure on US and European stock markets. As the price of Brent crude oil approached the $100 per barrel mark, by the close of trading on Thursday 10 September, the S&P 500 had fallen by 1.64 per cent and the Nasdaq by 1.6 per cent on a weekly basis, whilst the DAX index had lost 2.53 per cent.
European stock markets are also retreating. The German DAX index fell by 2.63 per cent for the week, the French CAC 40 by 1.96 per cent, and the British FTSE 100 by 1.93 per cent.
Last week’s top performer was Russia’s RTSI index, which rose by 5.18 per cent.
On the Istanbul Stock Exchange, the BIST 100 index also closed up by 2.72 per cent. Record levels for bond yields. Amid inflationary pressures and concerns over public debt, US 10-year bond yields reached 4.83 per cent. In Europe, German 10-year bond yields rose to 3.51 per cent, their highest level since 2009.US trade deficit shows no sign of narrowing despite tariffs. US President Donald Trump’s tariffs are also failing to reduce the US trade deficit. The US trade deficit in July reached $89 billion, up from $71 billion in June. US imports in July totalled $399.3 billion, whilst exports stood at $310.7 billion. Solar power overtakes coal in China for the first time. China’s electricity generation capacity from solar power (1,288 GW) exceeded that from coal (1,285 GW) for the first time in July. However, in the first half of the year, the combined share of wind and solar power in China’s electricity generation stood at 24.6 per cent, whilst coal’s share was 49.7 per cent (falling below 50 per cent for the first time).