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LONDON

Türkiye’s restrictive monetary policy is “bearing fruits” in the country’s fight against inflation and it is vital for the monetary and fiscal policies to be maintained, an OECD chief economist told Anadolu.

Alvaro Pereira said that the annual average inflation is expected to be around 30% this year, 18.5% next year, citing forecasts from the preliminary OECD Economic Outlook report published on Tuesday.

“Inflation usually has a huge impact on people and on their real incomes, and so, bringing down inflation has to continue to be a top priority for Türkiye, and we think that the policy is working,” he said. “It’s important (for) both monetary and fiscal policy to continue in the same way, so that you are able to continue to bring down inflation.”

Pereira noted that it usually "takes a while for things to change in a dramatic way” and that it is “not surprising that (inflation) is sticky,” saying that inflation in service prices is stickier than goods price.

“It’s not surprising that the process takes a bit longer than has been anticipated first, but we think that maintaining the policy is absolutely essential on political developments,” he said. “Right now, the most important thing is that, in terms of fiscal and monetary policies, the way, the movement will have to be in the same direction, independently but together.”

Citing the latest OECD estimate, he added that Türkiye’s budget deficit is expected to fall to 3% of gross domestic product (GDP) next year, largely due to improved revenue performance, while capital spending will decline.

Pereira stated that US tariffs that shook the global economy and trade will not have a major impact on the Turkish economy, but it is important to “find a solution and get some sort of an agreement with the US administration to lower trade barriers between the two countries.”

“Türkiye has some industries that can certainly export even further to the US,” he said.

“More tourism could be interesting, (as) Türkiye is a beautiful country with wonderful culture, and you have a lot of tourism but you have the potential to bring even further, and so, if you get good macroeconomic stability at the same time that you’re able to get an agreement with the US, I think this will also help to bring more foreign direct investment (FDI) and more tourism to the country,” he added.

Macroeconomic stability

Pereira emphasized that macroeconomic stability attracts foreign investors for long-term investments in the country.

“In every single country that attracts a lot of FDI in the long and medium term, (they) usually need to have macroeconomic stability—that’s why I insist that, to bring down inflation and (we need) to make sure that we have finances, competitors, (and) liabilities under control,” he said. “You have to have a friendly business environment, and there's been some interesting reforms in the past few years with that.”

“We have to work on two levels first to continue to bring down inflation and to make sure that the fiscal situation is under control, that’s first thing, and second thing is, in certain areas of Europe, Türkiye can be more competitive, and continuing there, form a path to trying to improve business climate is going to be absolutely essential—if we continue to work on those bills, and I think this will help Türkiye,” he said.

“But still, more can be done to bring down red tape and to improve regulations,” Pereira said. “In Türkiye, (…) bringing down those barriers and to improve the business climate should be a top priority way forward.”

He mentioned that uncertainties over the global economy have yet to weaken, as it remains high when it comes to economic and trade policies. He said these uncertainties have started to affect consumer and business confidence, as well as economic activity indicators.

Pereira highlighted that the US tariff uncertainties are hampering global economic growth. The OECD downwardly revised its growth forecasts for this year and the next for almost all countries due to this outcome.

He warned that these developments could fuel further inflation in some countries, advising them to try and negotiate to reach an agreement to reduce trade barriers to avoid further trade fragmentation, especially between the US and China.

“Both economies still depend on each other, so each economy brings something to the table the other does not have—we hope that the two biggest economies in the world get some sort of a deal, so that they’re able to reduce uncertainty (and) trade barriers, and get to a situation in which we have (them) doing better going forward,” he said.

Global growth estimates downwardly revised

The OECD downwardly revised its global economic growth for this year from 3.1% to 2.9% in its latest report released on Tuesday.

The organization’s March release estimated that the global economy would grow 3% next year, but it downwardly revised its 2026 growth forecast to 2.9% as well.

These downward estimates come after a 3.3% global economic growth last year, according to the OECD.

The organization cited increased uncertainties over trade policies for its downward revision.

Meanwhile, the Turkish economy’s growth outlook was downwardly revised from 3.1% to 2.9% for 2025 and from 3.9% to 3.3% for 2026, as per the latest OECD Economic Outlook report.