IMF Issues Critical Economic Recommendations for Turkey: Wage Setting and Tight Monetary Policy

Inflation Control and Wage Policy The International Monetary Fund (IMF), in its February 2026 report on Turkey, noted that domestic demand remains strong and the decline in inflation has not occurred at the expected pace.
To support the disinflation process, the report emphasized the need to move away from wage-setting methods based on past inflation indexation and instead align increases with target inflation rates.
Social Welfare and Employment Incentives Highlighting the tax burden on households with children, the IMF offered several proposals to enhance social welfare.
These include implementing tax credits for childcare and wage subsidies for low-income workers.
Such measures are expected to increase female labor force participation, reduce informal employment, and contribute to the fight against poverty.
Monetary Policy and Financial Risk Management The institution stated that policy rates should remain high until inflation targets are met, pointing out that growth in credit suggests monetary policy may not yet be sufficiently tight.
The report warned that the policy rate could be raised back to the 48 percent level if necessary.
While the banking sector remains profitable, high dollarization was identified as a risk factor, and reserves were noted to remain below IMF benchmarks.
Structural Reforms for Sustainable Growth The report underscored the importance of structural reforms for economic stability, listing priority areas such as facilitating financing for Small and Medium-Sized Enterprises (SMEs), implementing reforms in the education and legal systems, and encouraging renewable energy investments.
The IMF reiterated that policies increasing productivity and reducing external vulnerabilities are essential for the stability of the Turkish economy.