Survey predicts slower growth for Türkiye

A recent survey by the news agency Reuters has revealed that Türkiye‘s economic growth rates for this year and the next are projected to be below expectations.

The survey indicates that Türkiye’s economy is anticipated to grow by 3% this year and next, which is lower than the government’s recently updated forecasts. This development suggests a more profound slowdown as authorities work to control rising inflation.

In mid-2023, Ankara initiated a tightening policy, and since then, the central bank has raised interest rates by 4,150 basis points. The government has also implemented tax and savings measures to stabilize the economy following a series of currency crises and price increases.

Conducted between Oct. 8 and 14, the survey included 42 economists. It suggests that the efforts to reduce inflation are expected to bring the average gross domestic product (GDP) growth down to 3% for both this year and next. This figure contrasts with the government’s projections of 3.5% GDP growth for this year and 4% for next year within its three-year policy framework. The economy recorded a growth rate of 4.5% in 2023, and the survey median predicts a 3.6% increase in GDP by 2026.

Interest rates projected to drop by 20 points by 2025

Investment bank Natixis has confirmed that the government remains committed to orthodox economic policies. It has announced fiscal consolidation and budget measures that further restrict growth while assisting the central bank in tackling inflation.

According to the survey, economists expect the bank to lower interest rates to 30% by the end of 2025. The median response forecasts that the policy interest rate will decrease to 42.5% in the first quarter of next year and to 35% in the second quarter.

Economists anticipate that the rate reduction cycle will conclude in the third quarter of next year, stabilizing the policy rate at 30%.

Tight monetary policies, fiscal measures, and base effects have reduced inflation from a peak of 75.45% in May to 49.38% in September. The survey median indicates that economists expect inflation to fall to 43.5% this year and to 25.2% by the end of 2025.

The government predicts that annual inflation will decrease to 41.5% in 2024 and to 17.5% in 2025. The median forecast suggests that Türkiye’s current account deficit will reach 1.8% of GDP in 2024, compared to the government’s estimates of 1.7% and 2%.

Category	Value
Projected GDP Growth (2023)	3%
Projected GDP Growth (2024)	3%
2023 Actual GDP Growth	4.5%
Predicted GDP Growth (2026)	3.6%
Central Bank Interest Rate Increase	4,150 basis points
Expected Interest Rate (End of 2025)	30%
Expected Interest Rate (Q1 2024)	42.5%
Expected Interest Rate (Q2 2024)	35%
Inflation Rate (May 2023)	75.45%
Inflation Rate (September 2023)	49.38%
Expected Inflation (2023)	43.5%
Expected Inflation (2025)	25.2%
Government’s Inflation Predictions (2024)	41.5%
Government’s Inflation Predictions (2025)	17.5%
Projected Current Account Deficit (2024)	1.8% of GDP