ISTANBUL, July 23 (Reuters) – A recent Reuters survey of economists suggests that Turkey’s economic expansion will likely slow in the current year, while inflation is projected to remain above official projections despite stringent monetary policies. The median estimate from 34 economists participating in the July 18-23 poll indicates that GDP growth will reach 2.8% in 2025, down from 3.2% in 2024, before rebounding slightly to 3.3% in 2026. This contrasts with the government’s forecast of 4.0% growth for this year and 4.5% for the next, based on its three-year economic strategy unveiled last September.
In 2024, inflation surged to an annual high of 75.45% due to currency depreciation, strong domestic demand, and increased taxation. However, tighter monetary and fiscal policies helped reduce inflation to approximately 35% by June of this year. According to the survey, inflation is expected to decline further to 30% by the end of 2025 and reach 21% by the close of 2026. The central bank anticipates inflation to settle at 24% by year-end, with a maximum of 29%.
Following market instability triggered by the arrest of the Istanbul mayor, the central bank implemented tighter monetary measures in April, reversing a previous easing trend that began in December. Additional liquidity controls were introduced to raise the overnight funding rate above the official policy rate, effectively intensifying the tightening stance.
With inflation trending downward, analysts predict the central bank will resume its easing cycle during its upcoming monetary policy meeting. Earlier projections suggest a potential 250 basis-point reduction in the current 46% policy rate. The latest long-term outlook anticipates the key interest rate to fall to 41% by late September and 36% by the end of the year, with further reductions expected in 2026, bringing the rate to 23%.
Barclays analysts noted in a recent report: “After two consecutive 250 basis-point cuts in September and October, we expect the central bank to moderate the pace of reductions to 150 basis points during its final policy meeting of the year on December 11, due to a narrower real policy rate buffer.”
The survey also forecasts a current account deficit of 1.5% of GDP for 2025, rising slightly to 1.6% in 2026.
— News Original —
Turkish growth seen below government forecasts, inflation higher
ISTANBUL, July 23 (Reuters) – Turkey ‘s economic growth is seen slowing this year while inflation will stay higher than government forecasts despite tight policy, a Reuters poll of economists showed. n nGrowth in gross domestic product is expected to be 2.8% this year, slower than 3.2% in 2024, before picking up to 3.3% in 2026, according to the median forecast of 34 economists in the July 18-23 Reuters poll. n nSign up here. n nBased on its three-year policy roadmap published last September, the government predicts 4.0% GDP growth this year and 4.5% next. n nA depreciation in the lira, robust domestic demand and rising taxes boosted inflation in 2024, pushing it to an annual peak of 75.45%, but with the help of tight policy and fiscal measures it fell to around 35% in June this year. n nPoll medians showed annual inflation falling to 30% this year and 21% by the end of 2026. The central bank forecasts inflation to fall to 24% at the end of this year, with an upper band of 29%. n nThe central bank tightened policy in April following market volatility over the arrest of the Istanbul mayor, reversing an easing cycle that had begun in December. The central bank also implemented liquidity measures to set the overnight funding rate higher than the policy rate, effectively tightening policy more. n nWith the fall in inflation, economists expect the central bank to return to its easing cycle in its monetary policy committee meeting on Thursday. The policy rate is seen to be cut by 250 basis points from the current 46%, according to an earlier poll. n nIn the latest long-term poll, medians put the key rate at 41% at end-September and 36% by the end of this year. The poll sees the central bank continuing to cut rates next year, leaving it at 23% by end-2026. n n”After two more 250bp cuts in September and October, we expect the central bank to lower the pace of cuts to 150bp in the last MPC meeting of the year, on 11 December, due to a smaller ex-post real policy rate cushion,” Barclays said in a note. n nTurkey ‘s current account deficit is expected to be 1.5% of GDP this year and 1.6% next, median forecasts in the poll showed. n n(Other stories from the global economic poll) n nPolling by Renusri K; Writing by Ezgi Erkoyun, editing by Ed Osmond