Türkiye | 2025 GDP Growth could be 3.5%

Summary

Hard data show a faster deceleration in 4Q25, suggesting an annual GDP growth of around 3% and implying modest downside risk on our 3.7% forecast for 2025. We keep our 2026 GDP growth forecast at 4%, but evaluate risks might turn upside given the easing bias of the CBRT and our expectation of a neutral fiscal balance.

Key points

• Key points:
• Incoming hard data point to a weak outlook in industry and services in 4Q25, while construction sector also appears to lose momentum. Our monthly GDP indicator nowcasts an annual growth of around 3% for 4Q25, implying a limited contraction on a quarterly basis.
• Leading indicators, in line with our expectations, signal no clear trend in industry but some recovery in services and construction sectors for 1Q26.
• Data on demand in December confirms that domestic demand remained strong in 4Q25, while external demand made a negative contribution to growth. Leading indicators for 1Q26, however, suggest some moderation in domestic demand from particularly investment expenditures.
• The supply–demand balance remains less aligned than the Central Bank’s expectation so far. Indeed, output gap estimates were revised upward again in the latest Inflation Report. In this context, it will be important to monitor the demand impact of the recent restrictive macroprudential measures on overdraft facilities (KMH) and credit cards. The fiscal stance, meanwhile, does not signal additional upside risk to demand conditions for 1Q26.
• Growth in 2025 could have materialized at around 3.5%, slightly below our 3.7% forecast. Assuming resilience in foreign demand, looser external financial conditions, further ease in domestic financial conditions and a neutral fiscal stance, we evaluate risks on our 2026 GDP growth forecast of 4% might turn upside.

Geographies

Topics

Tags