Turkey Increases Minimum Wage by 30% for 2025

Investing.com -- Turkey has raised the monthly minimum wage for 2025 by 30%, increasing it from 17,002 lira to 22,104 lira ($627). This move, announced by Labor Minister Vedat Işıkhan on Tuesday, aligns with market expectations. Given that over one-third of the country's workforce is employed at the minimum wage, this increase will significantly impact a large portion of the population.

The wage hike is viewed positively by investors who expect concrete steps to combat one of the highest inflation rates in the world and to move away from populist policies. However, there were concerns that any increase above 30% might disrupt the Central Bank's inflation forecasts and complicate the timing of the first potential interest rate cut since February 2023. Minimum wage levels are a key factor in Turkey's economic policy.

The country's policymakers anticipate a slowdown in price increases and expect the current rate of 47.1% to drop to 21% by the end of next year.

President Recep Tayyip Erdoğan, who has ultimate authority over this politically sensitive decision, previously implemented significant wage increases to gain support from voters grappling with one of the worst cost-of-living crises in decades. This move had complicated the Central Bank's ability to manage prices by boosting domestic demand.

Following his re-election in May last year, Erdoğan appointed a new team to repair the damage caused by unusual policies, including ultra-low interest rates. This team, which includes Finance Minister Mehmet Şimşek and Central Bank Governor Fatih Karahan, quickly raised borrowing costs to 50% and received praise from foreign institutions.

Despite these efforts, officials are still struggling to convince local businesses and households that they can control prices and restore prosperity.