Türkiye raises inflation expectations and targets economic growth, and the “Aqua” company operates the “Red Sea” facilities system

Turkey raised its inflation expectations at the end of this year to 28.4 percent, in an adjustment that reflects the direct and indirect effects of the war with Iran on energy and commodity prices, while the government stuck to its path aimed at returning inflation to single digits by 2029, in parallel with accelerating economic growth to 5 percent.

Turkish Vice President Cevdet Yilmaz said, on Sunday, when presenting the government’s medium-term economic program for the period 2027-2029, that combating inflation took longer than expected as a result of the repercussions of the war. Pointing out that the direct and indirect effects of the conflict on inflation are estimated at about 7 percentage points, according to estimates by the Turkish Central Bank.

Yilmaz expected that inflation would begin to decline again during the last quarter of 2026, reaching 28.4 percent by the end of the year, before falling to 21 percent in 2027, 13.5 percent in 2028, and then 9 percent in 2029.

These expectations are much higher than the government's previous target. In its previous medium-term program for the period 2026-2028, Ankara expected inflation to reach 16 percent by the end of 2026.

Annual inflation slowed slightly to 31.51 percent in August, compared to 31.75 percent in July, according to official data.

Yilmaz said that the strong downward trend in inflation had “stabilized temporarily” as a result of supply-side pressures resulting from the repercussions of the war, but he stressed that the government had made “significant progress” in combating inflation, which remains the main priority of its economic program.

In exchange for raising inflation expectations, the Turkish government aims to return the economy to a faster growth path in the coming years. It expects GDP growth to accelerate from 3.3 percent this year to 4.2 percent in 2027, then 4.6 percent in 2028, reaching 5 percent in 2029.

Ankara is betting that continued low inflation and improved economic stability will provide a stronger foundation for growth and investment, while at the same time maintaining fiscal discipline.

The government expects the budget deficit as a percentage of GDP to decline to 3.5 percent in 2027, then to 3.1 percent in 2028 and 2.8 percent in 2029.

It also aims to gradually reduce the unemployment rate from 8.1 percent in 2026 to 7.6 percent in 2029, while providing about 2.1 million additional jobs during the program period, pushing the unemployment rate to less than 8 percent by the end of 2029.

The war in the Middle East became a major factor in recalculating the Turkish economy. Especially in light of its impact on energy and commodity markets and transportation costs.

Yilmaz said that the government is closely monitoring regional tensions and their effects on energy and commodity markets, and is taking measures to limit their repercussions on the Turkish economy.

High energy costs represent a particular challenge for Turkey, which relies heavily on energy imports, making any sharp rise in oil and gas prices potentially transferable to production and transportation costs and consumer prices.

Yilmaz said that the government had put in place a set of policies that he described as “realistic and consistent” to achieve the program’s goals, stressing that combating inflation and financial discipline will remain the top priorities.

The goals of the new program are not limited to inflation and growth; The government seeks to raise national income to more than $2.2 trillion, and to increase exports of goods and services to $450 billion by the end of the medium-term program period.

This reflects Ankara's attempt to balance reducing inflation and restoring growth, after years of sharp price increases. Annual inflation exceeded 30 percent since December 2021, before peaking at more than 75 percent in May 2024, and then began a gradual downward path.

The government program believes that the continuation of this path, in addition to controlling public finances and increasing production and exports, represents the basis for reaching single-digit inflation in 2029.

However, raising inflation expectations for this year to 28.4 percent, compared to 16 percent in previous expectations, reveals the extent of the shock that the war imposed on Turkish economic accounts, and puts the government’s ability to continue lowering prices to a new test in the coming months.

Today (Sunday), the Saudi company “Aqua” announced the achievement of the commercial operation date (PCOD) for the integrated facilities system in the “Red Sea” destination, which is powered by renewable energy and without a connection to the national grid, marking the start of the 25-year concession period.

This came after the signing of the project’s commercial operation date certificate between Red Sea Energy Utilities, the project company, and Red Sea Utilities, a subsidiary of Red Sea International.

The system includes a solar photovoltaic power plant with a capacity of 340 MW AC, coupled with a battery energy storage system with a capacity of 1,227 MW/hour, which Aqua describes as the largest off-grid battery system ever built in the world.

The system currently provides its services to the operating hotels affiliated with the Red Sea International, in addition to the Red Sea International Airport, the logistics center, the electric vehicle fleet, the employee village, and supporting community facilities.

The generation system produces up to 760,000 megawatt-hours of clean energy annually, which contributes to avoiding the emission of about 600,000 tons of carbon dioxide annually when operating at full capacity.

The project includes three seawater desalination plants using reverse osmosis technology, a waste management center, and a wastewater treatment plant with a capacity of 16,000 cubic meters per day, in addition to a district cooling system with a total capacity of 32,500 refrigeration tons.

The financial closure of the project took place in February 2022, through major financing facilities worth about $1.33 billion, out of a total investment of about $1.84 billion, provided by Saudi and international banks.

The Red Sea Energy Utilities Company is responsible for developing and operating the facilities system under a 25-year concession agreement, while “Aqua Operations” is undertaking the operation and maintenance work under a long-term agreement. The ownership of the project company includes “Aqua”, SPIC “Huang He Hydroelectric Power”, and “Saudi Tabreed”, according to “Aqua” data.

Muhammad Abunayan, founder and Chairman of the Board of Directors of Aqua, said that the project “sets a new global standard for sustainable development,” noting that the integration of renewable energy, water and environmental services within one system demonstrates the possibility of developing infrastructure of this size while preserving natural resources.

For his part, John Pagano, CEO of the Red Sea International Group, said that operating the destination without connection to the national grid and supplying it entirely with energy from renewable sources demonstrates the ability of sustainable infrastructure to support a tourism model that contributes to protecting the natural environment and communities.

During the construction phase, the project recorded 30 million safe man-hours without lost time injuries (LTI), according to Aqua.

The facilities system is subject to environmental requirements, including environmental and social impact assessments, obtaining the necessary permits from the National Center for Oversight of Environmental Compliance, and continuing monitoring and follow-up operations for environmental compliance during the operation phase.

The local content also contributed to the construction stages of the project, through the supply of equipment, materials and services from Saudi suppliers, whenever the technical specifications allowed for this, in addition to the participation of Saudi engineers and technicians in implementing the work of solar energy systems, energy storage, water desalination and cooling.

Over the 25-year concession period, the operation and maintenance of the facilities system within the Kingdom will continue, with the development of local cadres, and benefiting from Saudi suppliers in the supply of spare parts and consumables that meet the required standards.