Türkiye's Economy: Relief or Continued Struggle Post-2024 Measures?

In 2024, Türkiye implemented a series of economic measures aimed at stabilizing its economy, which had been grappling with high inflation, currency depreciation, and slowing growth. As we progress through 2025, it's essential to assess whether these interventions have provided the anticipated relief or if challenges persist.

Monetary Policy Adjustments

In late 2024, the Central Bank of Türkiye initiated a monetary easing cycle, reducing the key interest rate by 250 basis points to 47.5%. This move was part of a broader strategy to stimulate economic activity and counteract slowing inflation. The easing continued into early 2025, with the central bank lowering the rate further to 45% in January. These rate cuts have been instrumental in attracting foreign investors back to Türkiye's local debt markets, signaling renewed confidence in the country's economic direction. 

Inflation Trends

Türkiye has faced significant inflationary pressures in recent years, with rates peaking at 85.5% in October 2022. By November 2024, inflation had moderated to 47.1%, prompting the central bank to adjust its monetary policy. The bank's Monetary Policy Committee noted a flattening inflation trend in November and anticipated further declines in December. This outlook justified the decision to lower interest rates, aiming to balance inflation control with economic growth. 

Economic Growth and Foreign Investment

The Turkish economy exhibited mixed signals in 2024. Growth slowed over the quarters, with a 5.5% year-on-year increase in Q1, followed by 2.4% in Q2, and 2.1% in Q3. The deceleration was attributed to diminished domestic demand and the impact of high-interest rates implemented earlier to curb inflation. However, the recent monetary easing and signs of inflation moderation have rekindled foreign investor interest. In mid-January 2025, Türkiye's local bonds attracted $1.24 billion from foreign investors, reflecting optimism about the country's economic prospects. 

Labor Market and Wage Policies

To support workers amid economic challenges, the Turkish government announced a 30% increase in the minimum wage for 2025, setting it at 22,104 Turkish lira (approximately $630) per month. This move aims to enhance purchasing power and stimulate domestic consumption. However, there are concerns that rising wages could exert upward pressure on inflation, potentially complicating the central bank's efforts to maintain price stability.

Fiscal Measures and Debt Management

In a bid to manage impending debt maturities and attract international investors, Türkiye announced plans to issue a new 10-year U.S. dollar bond. This initiative includes a switch tender transaction, allowing the exchange of short-dated debt for the new bond, effectively delaying a significant portion of foreign debt due in 2025. The government's proactive approach aims to bolster investor confidence and ensure fiscal sustainability.

Conclusion

Türkiye's economic measures implemented in 2024 have yielded mixed outcomes. While there are positive signs, such as easing inflation and renewed foreign investment, challenges like modest growth and potential inflationary pressures from wage increases persist. The government's commitment to orthodox economic policies and proactive fiscal management indicates a strategic approach to fostering economic stability. However, sustained efforts and careful policy calibration will be essential to navigate the complexities of the post-2024 economic landscape.