Turkey has raised its minimum wage by 30% for 2025, offering relief to investors seeking signs of a shift away from populist policies and a stronger commitment to addressing one of the world’s highest inflation rates.
Labor Minister Vedat Isikhan announced on Tuesday that the monthly minimum wage will rise to 22,104 liras ($627) for 2025, up from 17,002 liras. This increase aligns with market expectations and will benefit over a third of the country’s labor force, as the minimum wage also serves as a reference point for other salaries.
The wage hike had prompted concerns that a larger increase could disrupt inflation forecasts set by the central bank and delay the potential first interest rate cut since February 2023. The minimum wage has long been a significant factor in Turkey’s economic policy.
“Given that the wage is adjusted with respect to expected inflation for 2025, it will make the central bank’s life easier,” said Selva Demiralp, a professor at Istanbul’s Koc University. “The chances of a rate cut are even higher now.”
Policymakers predict that inflation will slow to 21% by the end of 2025, down from the current 47.1%. The central bank’s Monetary Policy Committee will announce its interest rate decision on Thursday, with most economists surveyed by Bloomberg forecasting a 50% cut.
President Recep Tayyip Erdogan has previously raised salaries to gain favor with voters grappling with a severe cost-of-living crisis, driving domestic demand and complicating the central bank’s efforts to control prices.
Following his reelection in May 2023, Erdogan appointed a new market-friendly team, including Finance Minister Mehmet Simsek and central bank Governor Fatih Karahan, to reverse the damage caused by unorthodox economic policies. This team swiftly raised borrowing costs to 50%, winning praise from foreign investors. However, convincing local businesses and households to believe in the government’s ability to curb inflation and improve welfare has proven challenging.
