Türkiye Economic Outlook. January 2024

We expect GDP growth to materialize closer to 4.5% in 2023 and decelerate to nearly 3.5% in 2024, where the fiscal stance and the size of capital inflows will be decisive. Leading indicators show that domestic demand remains stronger than supply, posing risks on both inflation and current account deficit.

Key points

• Key points:
• On the demand side, our big data consumption indicators signal that consumption is not decelerating much further since November, which requires tighter financial conditions to help rebalance the economy and start anchoring inflation expectations.
• We remain prudent on our inflation projections and maintain our year-end expectation of 45% with a bias slightly to the downside.
• The Central Bank (CBRT) has stopped at 45% policy rate and signaled to continue tightening via macroprudential policies and quantitative tools.
• We maintain our call of 45% policy rate throughout 2024. On the fiscal policy side, excluding earthquake spending, we expect fiscal prudence to be enhanced in order to support coordination with monetary policy.

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