Turkey's Economic Outlook

ISTANBUL (Reuters) – Turkey's economy is projected to grow by 3% in 2023 and 2024, lower than the government's recent estimates, according to a Reuters poll of economists. This slowdown coincides with efforts by authorities to combat soaring inflation.

Economists unanimously expect the central bank to maintain its key interest rate at 50% this Thursday but anticipate a 250 basis points easing by year-end. The tightening measures commenced in mid-2023 to counter a long-standing low-rate strategy promoted by President Tayyip Erdogan aimed at spurring growth.

Since then, rates have increased by 4,150 basis points, with additional government tax and savings initiatives implemented to stabilize the economy, addressing past currency crises and price surges.

According to 42 economists surveyed from October 8-14, GDP growth is forecasted to average 3% for the next two years, contrasting with the government’s projection of 3.5% in 2023 and 4% in 2024. Growth was 4.5% in 2023.

The poll indicates that the GDP will rise by 3.6% in 2026. Natixis acknowledged the government's commitment to orthodox economic measures, asserting that fiscal discipline has constrained growth while assisting the central bank in moderating inflation.

Despite tighter policies affecting various economic indicators, a recession is not anticipated, though a slowdown is expected. The central bank will announce its interest rate decision at 1100 GMT on October 17.

Most economists believe significant policy relaxation will not occur until next year, forecasting a 20 percentage point reduction to 30% by the end of 2025. They expect rates to fall to 42.5% in Q1 of next year and 35% in Q2, completing the reduction process by Q3.

Tighter policies and fiscal measures have reduced inflation from 75.45% in May to 49.38% in September. The survey median indicates economists expect inflation to decrease to 43.5% this year and 25.2% by the end of 2025, while the government anticipates 41.5% inflation in 2024 and 17.5% in 2025.

Turkey's current account deficit is projected at 1.8% of GDP for both 2023 and 2024, closely aligning with government forecasts of 1.7% and 2.0% respectively.

Other stories from the October Reuters global economic poll

(Polling by Indradip Ghosh and Mumal Rathore; Writing by Ezgi Erkoyun; Editing by Jonathan Spicer and Alison Williams)