13.05.2025 10:16
The European Bank for Reconstruction and Development has lowered its growth forecast for the Turkish economy to 2.8% for 2025 and to 3.5% for 2026. This change is related to global economic uncertainties and pressures on domestic demand. The EBRD also highlighted the improvement in Turkey's external position.
The European Bank for Reconstruction and Development (EBRD) has projected that the Turkish economy will grow by 2.8% this year and 3.5% next year. EBRD published its Regional Economic Outlook report covering the countries in which it operates as part of its Annual Meetings that started today. Accordingly, the Bank revised its regional economic growth forecast down by 0.2 percentage points to 3%, compared to its forecast in February 2025. This change was influenced by global economic and trade uncertainties, weak external demand, and the indirect effects that increases in customs tariffs could have on national economies. EBRD expects economic growth in the countries where it operates to rise to 3.4% in 2026.
GROWTH FORECAST FOR TURKEY HAS BEEN LOWERED
The Bank has also revised its growth forecast for the Turkish economy downwards by 0.2 percentage points to 2.8%.
Expectations that tighter monetary policy could put pressure on domestic demand and that uncertainties arising from global trade policies could weaken external demand have influenced the growth forecast for the national economy.
While EBRD draws attention to the improvement in Turkey's external position, it predicts that economic growth will return to 3.5% in 2026.
INFLATION FORECASTS HAVE ALSO CHANGED
EBRD Regional Chief Economist Rafik Selim stated in his remarks regarding growth and inflation forecasts for the Turkish economy that they expect the decline in inflation to be somewhat slower and longer compared to their last forecasts in February. Selim mentioned that there could be a pass-through effect on prices due to the recent depreciation of the Turkish lira, saying, "We maintain our confidence in the government's commitment to sustain the disinflation path and we are looking forward to the next inflation report from the Central Bank of the Republic of Turkey (CBRT) to be announced on May 22."
EBRD EXPECTS HIGHER INTEREST RATES
Selim noted that they expect monetary policy in Turkey to remain tight for a longer period through higher policy rates and strict macroprudential measures, stating: "We welcome the CBRT's commitment to maintain a tight monetary stance and diversify its policy tools. In recent weeks, we have seen macroprudential policies being implemented to manage credit growth, support the Turkish lira, and rebuild reserves. There are five weeks until the next Monetary Policy Committee meeting on June 19, and at this point, the decision regarding (interest rates) will depend on developments in the coming weeks. EBRD has over 22 billion euros in investments in Turkey.