Borrowing costs have risen significantly as the central bank returns to more orthodox policymaking

Turkiye’s economic and political leadership remain committed to inflation management. MNCs can expect high borrowing costs to persist into Q3 2024 and the lira to depreciate gradually over the next 3–6 months, but confidence in economic policy will strengthen cautiously. Demand across all segments will remain muted in 2024 until more sustainable recovery can be enacted in 2025.


Hafize Gaye Erkan, Turkey’s chosen central bank governor after the May 2023 elections saw her term end in mid-February. She announced her resignation after scandals emerged of her family’s involvement in the central bank. Amid the scandals, it became clear that aside from personal rumors, it was her approach to policymaking, media management, and professional conduct that created discontent among the economic leadership—namely Minister of Finance Mehmet Simsek.

Her successor, Fatih Karahan, has been a deputy governor since July 2023, has strong technical credentials, and was suggested by Minister of Finance Simsek. The first inflation report and press conference under the new governor strengthened confidence in the central bank and its professional approach to monetary policymaking.

Our View

The central bank’s expectation for end-of-year inflation is 36%, with an upper limit of 42% YOY. FrontierView expects inflation to remain around 55–65% in H1 2024, gradually reaching near 45% by the end of the year. This assumes potential utility price hikes and gradual Turkish lira depreciation. It does not assume any further increases to the minimum wage, pensions, or any mid-year salary increases by the private sector. The risks to the inflation forecast are related to whether economic policy will be forced to shift after the March 2024 local elections, which would trigger faster lira depreciation, and whether any global commodity shocks occur. Both remain outside of FrontierView’s base-case scenario but have sufficient likelihoods, meaning businesses should alert corporate and keep flexibility in their budgets, at least until midyear.

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