Macro and Politics

*The Medium-Term Economic Program (MTEP) covering the 2026–2028 period has been published in the Official Gazette. The new framework signals a recalibration of inflation forecasts in line with the Central Bank’s interim targets, while projecting a modest downward revision in growth expectations. Under the updated projections, GDP growth is expected at 3.3% in 2025, accelerating to 3.8% in 2026, 4.3% in 2027, and 5.0% in 2028. Inflation is projected to end 2025 at 28.5%, before declining to 16.0% in 2026, 9% in 2027, and 8% in 2028. The budget deficit-to-GDP ratio is forecast to reach 3.5% in 2026, improving gradually to 2.8% by the end of the program period. Meanwhile, the unemployment rate is projected at 8.5% by year-end 2024, easing to 8.4% in 2025, 8.2% in 2027, and 7.8% by 2028. Consequently, we evaluate that the newly published 2026–2028 MTEP suggests that the rational policy stance remains broadly intact, with inflation forecasts recalibrated, growth projections moderately revised lower, and fiscal and labor market targets broadly maintained.

* The Treasury will hold 9m zero-coupon bond auction as well as the direct sale of 2y TLREF-indexed lease certificate today. According to its three-month (Sept – Nov 2025) domestic borrowing program, the Treasury faces a domestic redemption of TL255.8bn in September, while in return it plans to borrow TL346n in total throughout the month, indicating a roll-over ratio of 135%.