Türkiye | Resilient growth led by domestic demand

Summary

Domestic demand driven GDP growth could come in between 3.5–4% y/y in 2025. We maintain our 4% growth forecast for 2026, but see upside risks from carry-over effects, ongoing monetary easing cycle, signals of a neutral fiscal stance, and resilient global activity.

Key points

• Key points:
• High-frequency data suggest that production could cool more noticeably in 4Q25. Sectorally, a pronounced slowdown might have occurred in industry and services, while construction has decelerated.
• Our monthly GDP indicator points to nearly 3.5% y/y growth and approximately 0.25% q/q growth in 4Q25. Under this scenario, 2025 growth is highly likely to materialize between 3.5–4%, broadly in line with our 3.7% forecast.
• Data on demand conditions indicated that growth in 4Q25 might have been supported by domestic demand led by investment expenditures, while external demand has made a negative contribution. Consistent with our nowcast results, domestic demand appears to be the sole driver of growth throughout 2025.
• Contrary to the CBRT’s guidance, domestic demand conditions were not adequately deflationary in 2025 and it was one of the factors behind the shortfall in disinflation. Growth in 2026 may exceed the level implied in the CBRT projections presented in November 2025 inflation report, indicating that demand-driven upside risks to the disinflation process could remain in place.
• Despite downside risks such as tariff wars and rising geopolitical tensions, supportive policy measures could allow the global economy to slow only moderately in 2026. On the domestic front, considering carry-over effects, expected rate cuts, and limited fiscal discipline, there are upside risks to our 4% growth forecast for 2026. We will reassess our growth forecasts in the near term, depending on the effectiveness of policy coordination and the evolution of external conditions.

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