The Turkish policy regime under Mehmet Şimşek and the orthodox central bank team has now run long enough to be evaluated on outcomes rather than intentions. The headline outcome is the current account. Three years of conventional monetary policy, real positive rates, and a deliberate FX policy have collapsed the deficit, rebuilt reserves, and re-established the lira as a regional rather than an outlier currency. The cost has been growth that has come in below trend, but the trade-off has been politically tolerated.
Key takeaways
- The current account has narrowed materially.
- Gross and net reserves are rebuilt.
- The lira has stabilized within a manageable real-effective range.
- Disinflation is real, slow, and still incomplete.
Why orthodox policy worked this time
Sustained political backing — the Şimşek team has had cover that the 2018-2021 orthodox attempts did not. That backing has allowed real rates to remain positive for long enough to break expectations.
- Real rates: positive and sustained
- FX policy: more flexible
- Reserves: rebuilt
- External deficit: meaningfully narrower
What disinflation still requires
Inflation has fallen from the high double-digit peak but remains well above target. The last leg is the slowest and politically the hardest.
Where the curve trades
Turkish local rates have bull-steepened. The eurobond curve has compressed.
What could undo it
A pre-election political shift away from orthodoxy is the recurrent tail risk.
Turkey current account trajectory (% of GDP)
| Year | CA balance |
|---|---|
| 2022 | ~-5% |
| 2023 | ~-4% |
| 2024 | ~-2% |
| 2025 | ~-1% |
| 2026 est. | ~0% |
The external balance is the cleanest scorecard. It is clean.
Frequently asked questions
Is inflation under control?
Falling, not yet at target.
Are reserves real?
Yes, on both gross and net measures.
What's the residual risk?
A political shift away from the current policy mix.
The bottom line
The Şimşek-era restoration has delivered the external account. The remaining work is the slowest leg of disinflation.
