The year of living dangerously

TURKEY - Report 26 Apr 2026 by Murat Ucer and Atilla Yesilada

There is no sign that the Iran War will end anytime soon, with most experts now warning that the Straits of Hormuz may remain shut for months to come. Turkey has managed the spillover from the war adroitly – so far, judging by the success of the strong TL policy and her sticking to a line of strict neutrality. Yet 2026 will “smell” stagflationary, with Mehmet Simsek’s “program” being on its last legs, while our econ author argues that there is a need for “adjustment” for the CBRT’s USD/TL policy to remain tenable. Strangely enough, the hardship caused by the war has not affected polls in a meaningful way, with preliminary indicators suggesting the hit to domestic demand is strikingly modest.

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The econ author’s key message in this round is that we are “no longer in Kansas” as far as the macro outlook is concerned. Yet, there is this dangerous complacency in the air, he feels – with there being an apparent belief that nothing fundamental has changed: the shock is temporary, the damage is manageable and the CBRT may continue to stick to its USD/TL policy indefinitely, with a happy ending of sorts where inflation eventually will have fallen visibly. The econ author thinks quite differently, however.

We tried to address these issues as briefly as possible in our favorite Q&A format here. There will be no weekly report today.

Now read on...

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