{
  "title": "IMF Executive Board Concludes 2024 Article IV Consultation with Türkiye",
  "publication": "IMF News, October 11, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/10/11/pr-24369-turkiye-imf-executive-board-concludes-2024-aiv-consultation",
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  "summary": "On September 27, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Türkiye.",
  "publishDate": "2024-10-11",
  "sections": [
    {
      "heading": "Policy shift and recent actions",
      "content": "- A decisive shift in economic policies over the past year has tightened Türkiye’s overall policy stance.\n- The Central Bank of the Republic of Türkiye (CBRT) has brought the ex ante real policy rate into positive territory while reducing regulatory complexity.\n- Tax and expenditure measures underpin efforts to restore fiscal prudence and the commitment to stronger incomes policies has strengthened credibility.\n- Market sentiment has sharply improved, with domestic and foreign investors shifting into lira-denominated assets.\n- Lower commodity prices, buoyant exports, and reduced gold imports have strengthened the current account, supporting a large improvement in both the gross and net reserves position.\n- Credit default swaps (CDS) spreads are now at about half their mid-2023 levels."
    },
    {
      "heading": "Macroeconomic outcomes and IMF projections",
      "content": "- Headline inflation has fallen as tighter financial conditions are weighing on domestic demand.\n- Under the authorities’ gradual policy adjustment, inflation is expected to further decline.\n  - Inflation is expected to be 43 percent this year and 24 percent in end-2025.\n- Growth developments and projections:\n  - After a strong first quarter, growth has weakened and is expected to fall to 3 percent in 2024 and 2.7 percent in 2025.\n  - Growth is expected to recover toward 4 percent in the medium term.\n- Disinflation and improved confidence will support:\n  - A narrowing of the current account deficit to about 2 percent of GDP.\n  - Reserves to around 100 percent of the IMF’s adequacy metric."
    },
    {
      "heading": "Risks and vulnerabilities",
      "content": "- Risks around the baseline are significant and tilted to the downside, including:\n  - Stronger-than-expected wage and price inertia.\n  - A reversal of capital flows.\n  - Higher global energy prices.\n  - Escalating geopolitical tensions.\n- Significant financial and external vulnerabilities remain.\n- The authorities’ gradual approach to fighting inflation prolongs the period during which risks might occur."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Executive Directors agreed with the thrust of the staff appraisal and commended decisive policy tightening since mid-2023.\n- Directors urged the authorities to press ahead with coordinated fiscal, monetary, and incomes policies to anchor inflationary expectations and entrench macroeconomic stability.\n- Fiscal policy recommendations:\n  - A larger and more frontloaded fiscal consolidation to support disinflation efforts and further strengthen buffers.\n  - Strengthen tax administration, rationalize tax expenditures, broaden the tax base, and pursue energy subsidy reform.\n  - Limit capital spending to essential projects and enhance risk monitoring while protecting earthquake related spending.\n  - Address fiscal risks from contingent liabilities in state owned enterprises, public private partnerships, and pension costs.\n- Incomes and labor market:\n  - Phase out backward looking indexation and shift toward setting wages in line with inflation expectations.\n- Monetary policy recommendations:\n  - Continue tight, data dependent monetary policy until inflation converges to target levels.\n  - The central bank should stand ready to tighten further if needed.\n  - Further strengthen the monetary transmission mechanism, central bank independence, and communication.\n- Exchange rate and capital flow management:\n  - Foreign exchange intervention should focus on smoothing potentially destabilizing exchange rate movements and be scaled back as inflation recedes.\n  - Capital flow measures should be discontinued gradually as FX liquidity risk and inflation recede.\n- Financial stability and supervision:\n  - Ongoing vigilance and further reforms to maintain financial stability.\n  - Continue implementation of the 2023 FSAP recommendations and align the supervisory and regulatory framework with Basel III standards.\n  - Continue improvements to the AML/CFT framework and mitigate virtual assets risks.\n- Structural reforms:\n  - Advance reforms to achieve more inclusive, greener, and higher medium-term growth.\n  - Further energy and labor market reforms, including measures to boost female participation."
    },
    {
      "heading": "Türkiye: Selected Economic Indicators, 2019−29 (selected entries)",
      "content": "- Population (2023): 85.4 million\n- Per capita GDP (2023): US$13,243\n- Quota: SDR 4,658.6 million\n\n- Real GDP growth rate:\n  - 2019: 0.8\n  - 2020: 1.9\n  - 2021: 11.4\n  - 2022: 5.5\n  - 2023: 5.1\n  - 2024 (Proj.): 3.0\n  - 2025 (Proj.): 2.7\n  - 2026 (Proj.): 3.2\n  - 2027 (Proj.): 3.4\n  - 2028 (Proj.): 3.7\n  - 2029 (Proj.): 3.9\n\n- GDP deflator growth rate:\n  - 2019: 13.9\n  - 2020: 14.8\n  - 2021: 29.0\n  - 2022: 96.0\n  - 2023: 68.2\n  - 2024 (Proj.): 60.0\n  - 2025 (Proj.): 31.4\n  - 2026 (Proj.): 20.4\n  - 2027 (Proj.): 16.6\n  - 2028 (Proj.): 15.3\n  - 2029 (Proj.): 15.2\n\n- Inflation (period-average):\n  - 2019: 12.3\n  - 2020: 19.6\n  - 2021: 72.3\n  - 2022: 53.9\n  - 2023: 60.9\n  - 2024 (Proj.): 33.0\n  - 2025 (Proj.): 19.2\n  - 2026 (Proj.): 16.0\n  - 2027 (Proj.): 15.0\n\n- Inflation (end-year):\n  - 2019: 11.8\n  - 2020: 14.6\n  - 2021: 36.1\n  - 2022: 64.3\n  - 2023: 64.8\n  - 2024 (Proj.): 43.0\n  - 2025 (Proj.): 24.0\n  - 2026 (Proj.): 17.2\n\n- Unemployment rate:\n  - 2019: 13.7\n  - 2020: 13.1\n  - 2021: 12.0\n  - 2022: 10.4\n  - 2023: 9.4\n  - 2024 (Proj.): 9.3\n  - 2025 (Proj.): 9.9\n  - 2026 (Proj.): 9.6\n\n- Nonfinancial public sector overall balance (Percent of GDP):\n  - 2019: -5.0\n  - 2020: -4.7\n  - 2021: -2.7\n  - 2022: -5.4\n  - 2023: -5.3\n  - 2024 (Proj.): -3.7\n\n- General government overall balance (headline) 1/ (Percent of GDP):\n  - 2019: -4.0\n  - 2020: -2.6\n  - 2021: -0.8\n  - 2022: -3.5\n\n- General government gross debt (EU definition) (Percent of GDP):\n  - 2019: 32.4\n  - 2020: 39.4\n  - 2021: 40.4\n  - 2022: 30.8\n  - 2023: 29.3\n  - 2024 (Proj.): 25.2\n  - 2025 (Proj.): 26.0\n  - 2026 (Proj.): 25.9\n  - 2027 (Proj.): 25.6\n\n- Current account balance (Percent of GDP):\n  - 2019: -4.3\n  - 2020: -5.1\n  - 2021: -2.2\n  - 2022: -2.0\n  - 2023: -1.9\n\n- Gross external debt (Percent of GDP):\n  - 2019: 54.5\n  - 2020: 59.8\n  - 2021: 50.5\n  - 2022: 45.2\n  - 2023: 41.3\n  - 2024 (Proj.): 39.8\n  - 2025 (Proj.): 40.9\n  - 2026 (Proj.): 39.9\n  - 2027 (Proj.): 39.3\n\n- Gross financing requirement (Percent of GDP):\n  - 2019: 18.0\n  - 2020: 24.8\n  - 2021: 21.0\n  - 2022: 22.9\n  - 2023: 21.2\n  - 2024 (Proj.): 19.1\n  - 2025 (Proj.): 20.0\n  - 2026 (Proj.): 20.5\n  - 2027 (Proj.): 20.1\n  - 2028 (Proj.): 19.8\n\n- Real average cost of CBRT funding to banks (Percent):\n  - 2019: 5.4\n  - 2020: -1.7\n  - 2021: -59.4\n  - 2022: -35.4\n  - 2023: …\n\n- Growth of broad money (M2):\n  - 2019: 27.3\n  - 2020: 33.9\n  - 2021: 53.0\n  - 2022: 59.2\n  - 2023: 70.1\n\n- Growth of credit to private sector:\n  - 2019: 10.9\n  - 2020: 34.7\n  - 2021: 37.0\n  - 2022: 54.7\n  - 2023: 54.0\n\nSource: IMF Communications Department, October 11, 2024.\n\n---\n\n\n References\n\n- Republic of Türkiye and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/10/11/pr-24369-turkiye-imf-executive-board-concludes-2024-aiv-consultation"
    }
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    "Published: October 11, 2024",
    "A decisive shift in economic policies over the past year has tightened Türkiye’s overall policy stance.",
    "The Central Bank of the Republic of Türkiye (CBRT) has brought the ex ante real policy rate into positive territory while reducing regulatory complexity.",
    "Tax and expenditure measures underpin efforts to restore fiscal prudence and the commitment to stronger incomes policies has strengthened credibility.",
    "Market sentiment has sharply improved, with domestic and foreign investors shifting into lira-denominated assets.",
    "Lower commodity prices, buoyant exports, and reduced gold imports have strengthened the current account, supporting a large improvement in both the gross and net reserves position.",
    "Credit default swaps (CDS) spreads are now at about half their mid-2023 levels.",
    "Headline inflation has fallen as tighter financial conditions are weighing on domestic demand.",
    "Under the authorities’ gradual policy adjustment, inflation is expected to further decline.",
    "Growth developments and projections:",
    "Disinflation and improved confidence will support:",
    "Risks around the baseline are significant and tilted to the downside, including:",
    "Significant financial and external vulnerabilities remain.",
    "The authorities’ gradual approach to fighting inflation prolongs the period during which risks might occur.",
    "Executive Directors agreed with the thrust of the staff appraisal and commended decisive policy tightening since mid-2023.",
    "Directors urged the authorities to press ahead with coordinated fiscal, monetary, and incomes policies to anchor inflationary expectations and entrench macroeconomic stability.",
    "Fiscal policy recommendations:",
    "Incomes and labor market:",
    "Monetary policy recommendations:",
    "Exchange rate and capital flow management:",
    "Financial stability and supervision:",
    "Structural reforms:",
    "Population (2023): 85.4 million",
    "Per capita GDP (2023): US$13,243",
    "Quota: SDR 4,658.6 million",
    "Real GDP growth rate:",
    "GDP deflator growth rate:",
    "Inflation (period-average):",
    "Inflation (end-year):",
    "Unemployment rate:",
    "Nonfinancial public sector overall balance (Percent of GDP):",
    "General government overall balance (headline) 1/ (Percent of GDP):",
    "General government gross debt (EU definition) (Percent of GDP):",
    "Current account balance (Percent of GDP):",
    "Gross external debt (Percent of GDP):",
    "Gross financing requirement (Percent of GDP):",
    "Real average cost of CBRT funding to banks (Percent):",
    "Growth of broad money (M2):",
    "Growth of credit to private sector:",
    "[Republic of Türkiye and the IMF](http://www.imf.org/external/country/TUR/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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