Türkiye | Post-2Q25 surprise: signs of a slow-down

Summary

Leading survey-based indicators of August and hard data of July signal a slow-down in economic activity in 3Q25. We expect 2025GDP growth to be 3.5-4%, considering the better than expected first half and the ongoing easing cycle.

Key points

• Key points:
• Contrary to high-frequency signals, 2Q25 GDP growth surprised to the upside; which could reverse with weaker demand conditions in 3Q25. Leading indicators point to a deterioration, led by industry and services sectors; whereas construction may stay supportive.
• Our monthly GDP indicator nowcasts 0.5-1% q/q, implying a slowdown on a quarterly basis in 3Q25, which could still generate 4-4.5% y/y growth.
• Confidence surveys show demand remains weak, though firms expect some improvement in the upcoming months on the expected easing in financial conditions. Hard data suggest further contraction in private consumption and public spending, while investment and net exports could contribute positively in 3Q25 on a quarterly basis- so inventories may be run down.
• After 2Q25 upside surprise, the output gap remained above the CBRT’s latest projections in 2Q25, which we expect to become more negative as of 3Q25, yet still signaling the support from demand conditions to disinflation likely appears weaker than the CBRT envisages.
• The CBRT has already started rate cuts, implying more supportive financial conditions going ahead. On fiscal stance, as shown in the MTP, the negative fiscal impulse of this year since April, might become neutral in 2026. After the carry-over impact of the first half, 2025 GDP growth might reach in 3.5–4%. We remain prudent and keep our previous 2026 GDP growth forecast of 4%, given the uncertainty over global tariff wars, geopolitical risks and domestic unknowns.

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