Fitch raises Turkish economic 2024 growth forecast to 3.5% from 2.8%

Fitch Ratings this week said it had raised its forecast for Turkiye’s economic growth in 2024 to 3.5% from 2.8%, as it also revised its global economic growth forecast for the year to 2.6%, from its previous estimate of 2.4% in March.

The upward revision is a result of improving confidence in European recovery, the revival of China’s export sector, and domestic demand in emerging markets excluding China showing stronger momentum, according to the rating agency.

The report noted that the Turkish economy grew above expectations in the first quarter of 2024 due to the recovery in exports, a sharp decline in imports and strong domestic demand.

The Turkish economy’s growth forecast for 2024 was revised up to 3.5% from 2.8%, while it is expected to expand 3% in 2025 and 3.2% in 2026.

The report stated that tighter monetary policy, slower credit growth and the expected tightening of fiscal policy will help reduce inflation in 2024, and will contribute to the decrease in the annual rate starting from July with significant base effects.

Year-end inflation expectation is 43% for 2024, 23% for 2025 and 18% for 2026.

Meanwhile, Eurozone’s growth estimate for this year was revised up by 0.2 percentage points to 0.8%; however, U.S. growth forecast was unchanged at 2.1% since its economy is slowing but only gradually, it added.

“European recovery prospects are on a firmer footing as the terms-of-trade and energy shock reverses, energy-intensive industries start to pick up in Germany and real wages rebound,” the agency said in a statement.

“The U.S. economy is slowing as last year’s outsized fiscal impulse fades, imports recover and credit growth remains weak. But household-sector labour income continues to grow at a decent clip and robust household finances do not point to a sudden jump in the saving ratio,” it added.

China’s 2024 growth also saw an upward revision to 4.8% from 4.5%, but that is expected to fall to 4.5% in 2025 as exports and government spending decelerate.

Growth expectation of emerging markets excluding China was also raised up sharply by 0.5 percentage points to 3.7% for this year.

“Domestic demand has weakened in China as the property market collapse worsens and private consumption growth remains anaemic,” said the statement. “But fiscal policy is being loosened and exports have rebounded, helping real GDP.”

“However, for 2025, we forecast world growth to edge down to 2.4% as U.S. growth slows to a below-trend rate of 1.5% and growth in the eurozone picks up to 1.5%,” it added.