Türkiye Economic Outlook. March 2026

Summary

The Turkish economy grew by 3.6% in 2025, while the disinflation process was maintained. 2026 is set to be a challenging year, with downside risks stemming in particular from the recent Middle East conflict; however, a well-calibrated policy mix could help mitigate these risks.

Key points

• Key points:
• The world economy showed resilience in 2025 despite negative shocks. Global growth is likely to remain dynamic in 2026, driven by policy tailwinds and AI, at least if the Iran war proves to be short-lived.
• Recent tensions in the Middle East have reinforced the need for a prudent domestic policy stance. Based on the duration and the depth of the impact from the war, we can see limited monetary easing and only mild fiscal support going ahead in the short term.
• Growth has remained relatively solid so far, although the outlook suggests a gradual moderation over the coming quarters. Longer and deeper the conflict, depending on the increasing external financing needs, a more severe trade-off on growth could happen.
• The disinflation process is still underway, even if higher energy prices and supply-side factors may slow the pace of improvement. We maintain our 2026 year end inflation forecast of 25% and policy rate of 32% with increasing upside risks.
• Higher energy prices, tighter external conditions, and risks to trade and tourism weigh on the current account. Reserve depletion and potential dollarization could add pressure on the currency. We are closely monitoring developments and will revise our forecasts accordingly when we have some clarity.

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