Turkey’s new economic roadmap: capital first, labour waits again
Turkey’s upcoming Medium-Term Programme (MTP), due on 7 September, is meant to chart the country’s economic course for 2027-2029. But with inflation running at more than double the official target, the plan is already losing credibility before it is even unveiled. The real story, however, is not just the missed numbers. It is the policy direction: support for industrial capital is arriving ahead of the programme, while workers’ incomes continue to erode with no interim relief in sight.
What is the Medium-Term Programme and why does it matter?
The MTP is a three-year roadmap that sets key macroeconomic targets: growth, inflation, unemployment, the current account balance, exports and imports. It also outlines public finance goals, budget balance and expenditure ceilings, plus the policy framework for priority reforms. For the 2026-2028 period, announced in September 2025, the targets were 3.8 per cent growth, 16 per cent year-end inflation and 8.4 per cent unemployment for 2026.
Why are inflation targets already off track?
The gap between target and reality is starkest on inflation. The Central Bank’s August Market Participants’ Survey put the year-end inflation expectation for 2026 at 29.43 per cent, nearly 13.5 percentage points above the MTP target. Official inflation stood at over 31 per cent in July. The 16 per cent target itself was a revision from the 9.7 per cent forecast in the 2025-2027 programme. The Central Bank’s latest inflation report also raised its 2026 year-end forecast from 26 to 28 per cent.
Despite these repeated upward revisions, wage increases at the start of the year were capped based on the targeted inflation rate, not past inflation. This means workers’ purchasing power has been squeezed by design, even as the cost of living climbs.
What support is being given to industrial capital?
Ahead of the new MTP, the economic management has been most attentive to the industrial sector. Industrial capital has complained about high interest rates, financing costs and a weak exchange rate. Many of these demands are being met through credit and incentive mechanisms, even before the programme is announced.
Following the Economic Coordination Council meeting on 24 August, the government emphasised “no compromise on fiscal discipline” while simultaneously outlining new financing and subsidy measures for capital. Key measures include:
- Increasing the per-employee subsidy in certain manufacturing sectors to 3,500 lira.
- Raising the daily rediscount credit limit for exporters from 4.5 billion to 5 billion lira.
- Increasing the Investment-Commitment-Based Advance Credit Programme limit to 750 billion lira, with an additional 250 billion lira in new credit for manufacturing.
- Granting the tourism sector an extra 60 billion lira in Treasury-guaranteed financing.
It is now largely clear which sectors’ demands will be met before the new MTP is even announced.
What about workers’ incomes?
While the economic administration accelerates measures to reduce capital costs, there is no mention of compensating workers for their loss of income. The net minimum wage for 2026 is set at 28,075 lira, with no interim pay rise during the year.
According to the latest research from the Confederation of Turkish Trade Unions (TÜRK-İŞ), the poverty line, defined as the monthly food expenditure for a family of four, has risen to 37,388 lira. By August, the net minimum wage was already about 9,300 lira below that food-only threshold. The same survey puts the overall poverty line for a family of four at 121,786 lira, and the monthly cost of living for a single worker at 48,305 lira. TÜRK-İŞ also reports food inflation of 37.9 per cent over the past year.
In contrast, the decision to raise the wage subsidy for employers in manufacturing to 3,500 lira per employee drew attention. No adjustment was made to workers’ wages midway through the year, but the increase in employer support, ahead of the new MTP, reveals the policy priorities.
What does this mean for economic policy?
Wages are eroding while the cost of basic necessities, from housing to food, rises. Yet the economic policy debate centres on how to reduce the costs of capital. The MTP is supposed to be a roadmap for the whole economy, but the signals so far suggest a lopsided approach: support for capital, patience for labour.
Frequently asked questions
When will the new Medium-Term Programme be announced?
The new MTP is expected to be announced on 7 September, covering the 2027-2029 period.
Why is the inflation target so far from reality?
Market expectations for year-end inflation in 2026 stand at 29.43 per cent, while the official target is 16 per cent. Official inflation was over 31 per cent in July, and the Central Bank has repeatedly revised its forecasts upward.
What is the minimum wage in Turkey in 2026?
The net minimum wage for 2026 is 28,075 lira, with no interim increase. According to TÜRK-İŞ, the food-only poverty line for a family of four is 37,388 lira, meaning the minimum wage falls short of basic food costs.
What support is being given to businesses?
The government has increased per-employee subsidies in manufacturing to 3,500 lira, raised export credit limits, expanded the investment credit programme to 750 billion lira, and added 60 billion lira in financing for tourism.