EBRD shares growth forecast for Turkish economy

The bank has released its Regional Economic Prospects report covering the countries in which it operates. According to the report, the EBRD has lowered its regional economic growth forecast by 0.3 percent to 3.2 percent. Weak external demand, the impact of conflicts and weak reform momentum in these countries were influential in this decline.

The EBRD kept its growth forecast for the Turkish economy this year at 3 percent.

According to the report, tight monetary and fiscal policies led to a significant reduction in inflation and an improvement in the country's external position, while net exports increased and the current account deficit decreased steadily.

On the other hand, the EBRD warned against prematurely easing policy measures, amid concerns that inflation remains high, geopolitical uncertainties and the impact of the real appreciation of the Turkish lira on export competitiveness could pose downside risks to the economy.

The bank predicted that the Turkish economy will grow by 3.5 percent in 2026.

GROWTH RATE WILL GAIN ACCELERATORY IN 2026

EBRD Regional Chief Economist Rafik Selim told AA that the Turkish economy has grown by an average of 5 percent in recent years, which is evidence of the economy's strong foundations and resilient private sector.

However, Selim said that they expect growth to be slightly lower this year and next year due to the tightening in monetary, fiscal and income policies since June 2023, and continued:

"We recommend against easing this policy mix prematurely. We see a risk if policies are normalized without inflation expectations being firmly anchored. Inflation expectations of market players, the real sector and households continue to change. Therefore, the timing of any decision to ease the policy mix should be carefully chosen to avoid any deterioration in investor confidence that Turkey has gradually gained over the last two years and any derailment in the disinflation process."

Selim, noting that they foresee a slight increase in economic growth in 2026, said, "This growth will be supported by the easing of financing conditions, the recovery in private sector activities and strong external demand. As expected, it took about a year between June 2023 and mid-2024 for the tighter policy mix to start showing its effects (on the economy). Therefore, the slowdown will be felt more in 2025 and the acceleration in growth may start to gain momentum from 2026."