Türkiye | 1Q25 q/q growth: Slower, yet closer to potential

Summary

The Turkish economy grew by 1.0% q/q in 1Q25, leading to an annual growth rate of 2.0%. Our monthly GDP indicator nowcasts a deceleration to a quarterly growth nearing 0% in 2Q25, which would start improving in 3Q25 with more supportive conditions.

Key points

• Key points:
• After its strong support in 4Q24, domestic demand weakened with quarterly contractions in private consumption (-0.4% q/q) and investment (-1.4% q/q), while net exports contributed positively to the quarterly growth.
• On the production side, the sectors grew by 1.4% q/q with a much higher contribution from services. Industrial and construction value added rose by 0.4% q/q and 2.2% q/q, respectively, whereas agricultural output contracted by 2.8% q/q.
• Overall, 1Q25 realizations pointed to a more balanced picture between demand and supply, as stocks’ contribution was nearly close to zero on a quarterly basis.
• Leading indicators show a fast deterioration on the production side in 2Q25 with declining manufacturing capacity, PMI remaining in the contractionary zone and the sentiment regarding current conditions and expectations worsening. Demand side indicators confirm the slowdown in the face of the recent tightening measures.
• Given the slightly alleviated tariff-induced risks on the global side, coupled with the selective support from quasi fiscal policies and monetary easing cycle starting from 3Q25, we maintain our 2025 GDP growth forecast of 3.5% y/y but evaluate the balance of risks tilted to the downside.

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