Publications

Headline inflation realized as 0.87% m/m, lower than both market and our expectations(1.25%), led the annual rate down to 31.1%, yet the underlying trend remains strong. We now expect 31.5% inflation for the year end and CBRT to remain cautious with a similar 100 bps cut next week.

Türkiye’s economy grew by 3.7% y/y in the first three quarters of the year. Growth in 2025 is highly likely to align with our 3.7% forecast, while for 2026 we maintain our 4% growth forecast, considering the expected easing cycle, neutral fiscal stance , carry over impact and resilience expectation in the global economy.

The total FX position of the economy continued to improve in 3Q25 (with the latest data of Aug25) due to an improvement in public sector’s FX position, led by the CBRT. The composition of external debt continues to shift between the public sector and the real sector.

Consumer prices rose by 2.55% m/m, lower than both consensus (Bloomberg, 2.7%) and our expectation (2.85%), leading to its annual inflation to retreat to 32.9%. We now expect 2025 year-end inflation to be 32.5%, raising upside risks on our 2026 year-end forecast of 23% as well.

Hard and leading data indicate a quarterly GDP growth slowing down to 0.5–1.0% q/q in 3Q25 (vs 1.6% q/q in 2Q), driven by weakening signals in domestic demand. 2025 GDP growth will likely be in the range of 3.5–4%, so we evaluate the risks on our growth forecast of 3.7% as balanced.

Financial conditions started to turn supportive a bit in September with the fall in credit interest rates. With a lesser fall in TL deposit rates though, margins are still on pressure. Yet, the sector well manages the cost evolution and expanding loan volumes in higher yield segments which improves the NIMs gradually.

Our baseline scenario assumes the continuation of the restrictive policies prioritizing disinflation in the short term. Global financial volatility affecting demand for EM assets, Trump policies particularly impacting Europe, and increasing domestic unknowns are near term risks on the Turkish economy, keeping us cautious.