We expect US protectionism to fuel uncertainty, and pressure global growth downwards and inflation upwards. In Türkiye, soft landing efforts remain on growth and employment outlook, increasing the downside risks on public spending cuts. Monetary policy communication becomes less hawkish and signals an easing cycle soon.
We maintain our assumption of a soft landing with only mild downward revisions on growth with 2.5% in 2025 (vs 2.7% previously) and 4.5% in 2026 (vs. 5.2% previously), taking into account new external risks and more gradual rate cuts of the CBRT.
Given the increasing challenges on inflation outlook and potential risks from Trump administration, we remain prudent on our exchange rate projections by maintaining 45.5 USDTRY 2025 end forecast despite the stronger 2024 realization.
Following the most recent upward CPI surprises, we have slight upward revisions to our CPI forecasts with 44.5% for 2024 end (vs. 43%) and 26.5% for 2025 end (vs. 25%).
The CBRT made important changes in their communication in November MPC meeting, signaling an easing cycle potentially as early as December. We kept our first rate cut expectation as December but reduced its pace to 100bps, lower than the current market pricing of 200-250bps. We expect the CBRT to remain cautious and reach 31% policy rate by end 2025.
We will try to understand how the policy mix will be shaped. Medium Term Program signals a clearer fiscal consolidation 2025 onwards. Yet, given the external risks weighing on growth to the downside, we expect a relatively limited consolidation.
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