The new Medium Term Program, which is published annually, was published once again in 2024. The latest program is planned to cover 3 years of time, starting from 2025 and lasting until 2027.
What is this plan?
The Medium Term Program, more commonly referred to as MTP (OVP), is a document that announces the government’s main policies including macro policies, general principles, macroeconomic targets, revenue stream as well as expenditure forecasts for the next three years. These forecasts include budget balance, debt levels, and appropriation ceilings for public administrative bodies.
This plan is prepared annually by the Ministry of Treasury and Finance and the Presidency of Strategy and Budget with a three-year perspective and is formalized by the President's decision. Essentially, it is important for public institutions to fully follow the objectives and priorities explained in the plan while they are in the process of preparing budgets, rules, significant decision-making and implementation throughout the whole period that the program covers.
The president of Türkiye, Recep Tayyip Erdoğan, suggested that he has full trust in the MTP, which prioritizes elements like investment, production, employment, exports while the fight with inflation is continuing.
Moreover, the Vice President Cevdet Yılmaz said that “The main objective of our program is to gradually reduce inflation to single digit levels,” (as of 2024, the inflation is around 52%) while giving his speech on the Medium Term Program 2025-2027.
Outcomes of the previous plan
Despite all the negative incidents, including a catastrophic earthquake experienced in February 2024, and ongoing social and economic burdens, like the issues of access to sources, in Türkiye; the Medium Term Program that covered 2024-2026 still continues its journey according to the aims.
Projections for the main goals such as growth, foreign trade, account balance, inflation, employment rates are fitting the expectations and the target. Therefore, it is possible to say that current forecasts still remain mostly valid. The national income growth was estimated at 4.0 percent for 2024, and is expected to be below the MTP forecast throughout the year due to the rebalancing amid the tight macroeconomic policy stance.
It is also believed that several factors such as investments will result in significant improvement in the current account balance compared to the MTP expectations. Economic activity growth continues to exceed MTP targets of the following years, which will be discovered in depth in the following paragraphs.
The Projections of This Plan
In the presentation made for the MTP, there were several parts that were pointed out by Cevdet Yılmaz. First and foremost, the annual inflation target was 33 for 2024 in the previous MTP. With the revision, this aim was updated to be 41.5%. Moreover, the inflation goals for 2025 and 2026 were increased by 2.3% and 1.2%, respectively. This underlines that the Turkish economy lacked the improvement in the aspect of inflation in these years, while it is hoped that it will be fixed with the new policies and measures.
Additionally, the target set for the current account deficit to gross domestic product (GDP) ratio was lowered by 1.4%, to 1.7% for 2024 in the new plan.
Furthermore, the expected growth rate for 2025 was decreased by 0.5 points, becoming 4%. The new growth rate aims were set as 4.5% and 5% for 2026 and 2027, respectively.
As for the unemployment rate, it is expected to decrease to 8.8% in 2027 as shown in the graph below.
For macroeconomic aims and policies in the aspect of growth, the MTP was foreseen to support the disinflation process with the aim of having the rate decreased.
The most highlighted points in the MTP are structural transformation in industry, innovation, accelerating green transformation, digital transformation, strengthening human capital, which generally focus on growth, prices and the economic welfare of citizens.
The economic expectancies for the years until 2027 are changing every year, as we were able to see from the comparisons made between the MTP of 2023 and 2024. Thus, with the new policies that will be applied and the new measures taken, the new MTP poses a hope for the economical improvement of the Republic of Türkiye, despite sometimes not being able to reached the targeted levels.