Türkiye| Absence of significant cooling down in activity

Summary

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.

Key points

• Key points:
• GDP grew by 1.1% q/q in the 3Q25(vs market expectation of 0.6%)—slightly above potential—showing only a modest loss of momentum despite faster slowdown signals from hard and soft high frequency data. While industry and services experienced some deceleration, the construction sector grew strongly in line with expectations.
• Leading indicators suggest that, despite some recovery on the production side—particularly in industry and services driven by a pickup in demand—the overall outlook remains weak. Indeed, our monthly GDP indicator points to 4.4% y/y growth in the 4Q25, while signaling a further loss of momentum on quarterly basis.
• Contrary to our expectation of weakened demand in high frequency data, aggregate demand remains strong in 3Q25. Domestic demand excluding inventories contributed 6 percentage points to annual growth and posted a solid increase on a quarterly basis. The imbalance between supply and demand persists.
• Sectorial survey indicators show signs of a revival in demand in the 4Q25. Therefore, the output gap may not be as disinflationary as the Central Bank envisages, posing a significant risk to next year’s inflation target of 16%.
• GDP could grow between 3.5–4% in 2025 with high likelihood on strong momentum so far. Considering the expected rate-cut cycle, more neutral fiscal stance going forward, the carry-over effect, and expectations of resilience in the global economy despite downside risks, we continued to forecast 4% annual growth for 2026.

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