The OECD has updated its growth forecast for Turkey.

The OECD's Economic Outlook Report has been published. According to this report, the global economy continues to remain resilient despite many uncertainties, with inflation remaining moderate and a revival in trade.

Although consumer confidence has not yet reached pre-pandemic levels in many countries, the decline in inflation supports real household income growth and spending. While pressures on the labor market continue to ease, unemployment remains generally low.

Real interest rates remain restrictive, but low nominal yields are creating some early signs of revival in interest-sensitive housing and credit markets. Despite ongoing pressures in the service sectors, headline inflation has returned to target levels in many developed and emerging market economies.

GLOBAL ECONOMY TO GROW BY 3.2%

In this context, the OECD forecasts that global economic growth will be 3.2% this year and 3.3% in 2025 and 2026. Thus, the world economy is expected to maintain a generally stable growth level over the next two years.

In its Economic Outlook Report published in May, the OECD had projected global economic growth to be 3.1% this year and 3.2% for 2025.

In its temporary economic outlook report published in September, the institution also predicted that the global economy would grow by 3.1% this year and set its forecast for 2025 at 3.2%.

Thus, the OECD revised its growth forecast for both years upward by 0.1% compared to previous estimates.

WARNING ON PROTECTIONIST POLICIES IN TRADE

This year, the U.S. economy is expected to grow by 2.8% and by 2.4% in 2025, while China's economy is projected to grow by 4.9% and 4.7%, respectively.

The OECD warned of an increase in protectionist policies in trade. As trade policy uncertainty has increased in recent years, a continuing rise has been observed in the number of import-restrictive measures implemented by major economies.

The increase in global trade restrictions raises import prices, posing a risk of increasing production costs for businesses and lowering living standards for consumers.

GROWTH FORECAST FOR TURKEY HAS SLIGHTLY INCREASED FOR THIS YEAR

Due to the necessary macroeconomic stability policies slowing domestic demand, Turkey's economy is expected to grow by 3.5% this year and by 2.6% in 2025. This rate is projected to be 4% for 2026.

In its May report, the OECD had predicted that growth in the Turkish economy would be 3.4% this year and 3.2% in 2025.

In its September assessment, the institution had forecasted that the Turkish economy would grow by 3.2% this year and by 3.1% in 2025.

ECONOMIC GROWTH WILL BE MODERATE, MONETARY AND FISCAL POLICY MUST STAY ON COURSE

According to the report, tightening financial conditions and ongoing fiscal consolidation in Turkey will limit household consumption. As the effects of the post-earthquake reconstruction process fade, investment and public consumption will also slow down.

However, with improvements in the external environment and a continuing revival in international tourism, an increase in Turkey's exports is expected.

In Turkey, the current account balance has shown improvement due to the rebalancing of the driving forces of economic growth, the positive outlook in tourism, and natural gas production in the Sakarya field. While foreign exchange reserves are increasing, it is expected that monetary and fiscal policy will remain tight.

CENTRAL BANK WILL MAINTAIN ITS DETERMINED STANCE

According to the OECD, both monetary and fiscal authorities reiterated their commitment to maintaining tight policies to put the Turkish economy on a sustainable path. The Central Bank of the Republic of Turkey is keeping the policy interest rate at 50% and stated that it will resolutely use all its tools in line with price stability.

In this context, economic growth in Turkey will be moderate. Measures to control inflation will show their effects, but inflation will gradually decrease. The OECD forecasts that inflation in Turkey will average 30.7% annually in 2025, and this rate will decline to 17.2% in 2026.

According to the report, to fully benefit from the improving international environment, authorities need to maintain macroeconomic stability policies until they make solid progress toward achieving inflation targets.

A stable and predictable policy framework, along with a stable macroeconomic environment, can significantly attract international investments. Structural reforms can further support these stability efforts and enhance long-term growth.