Türkiye Economic Outlook. September 2025

Summary

Our baseline scenario assumes the continuation of the restrictive policies prioritizing disinflation in the short term. Global financial volatility affecting demand for EM assets, Trump policies particularly impacting Europe, and increasing domestic unknowns are near term risks on the Turkish economy, keeping us cautious.

Key points

• Key points:
• Led by the positive surprise of 2Q25 GDP data, 2025 GDP growth might reach 3.5-4%, creating a carry-over impact for 2026. Nevertheless, we remain prudent and keep our previous 2026 GDP growth forecast of 4%.
• We envisage that the CBRT continues rate cuts but reduces its pace with an increasing reliance on macro-prudential measures for longer (36.5% rate by end 2025 and 30% by end 2026). We assume the negative fiscal impulse of this year seen since April might turn neutral in 2026.
• We keep our year-end inflation expectation of 30% with limited upside risks. Given the last months’ stickiness, we add some persistence on certain services items and revise our 2026 year-end inflation forecast to 23% from 21%. We still assume a limited average real appreciation in 2026 with no changes in our previous USDTRY forecasts (45 USDTRY by end 2025 and 52 USDTRY by end 2026).
• We expect the abundant level of CBRT reserves and a relatively higher real interest rate to act as buffers against any volatility in the near future.
• We evaluate the balance of risks on our forecasts tilted to the downside for growth, depending on the effectiveness of the policy mix, which would also weigh down on our exchange rate and inflation forecasts, generating more room for rate cuts.

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