Our Thoughts On the Turkish Economy

Turkey’s inflation rate rose every month from October 2023 to May 2024 when it hit a peak of 75%  year-on-year. At the time, the finance minister, Mehmet Şimşek, saw this as the peak rate and claimed that Turkey was entering a disinflation process. So far, so good. The rate is now just over 40%. But Turkey’s inflation target has been 5% every year since 2012 and it has been missed by a wide margin every year. Achieving that rate is not realistic in the next year or two but Turkey is now heading in the right direction. Notably, credit to the private sector was 58.9% of GDP in 2023, well down from 89.3% in 2020. That is a particularly encouraging sign for monetary and financial stability.

GDP growth is holding up well, and should reach the IMF’s 3.0% forecast for 2024, with similar growth in 2025.