Turkey’s inflation expectations for 2025 have slightly declined, while economic growth forecasts for the next two years have been revised upward, according to the Central Bank’s Market Participants Survey released on March 7.
Key Inflation and Interest Rate Trends
- End-2025 Inflation Outlook: Forecast lowered from 28.3% to 28.04%.
- 12-Month Ahead Inflation: Expectations dropped from 25.26% to 24.55%.
- 24-Month Ahead Inflation: Slight decline from 17.26% to 17.06%.
- Central Bank’s Official Forecast: Inflation projection for 2025 was raised to 24% (from 21%), while 2026 remains at 12%.
- March 6 Rate Cut: 250-basis-point reduction lowered the one-week repo rate to 42.5%, marking the third consecutive cut since December.
Economic Growth and Current Account Outlook
- 2025 GDP Growth: Revised up from 3% to 3.1%.
- 2026 GDP Growth: Increased from 3.9% to 4%.
- Current Account Deficit:
- 2024 Forecast: Widened from $18.8 billion to $19.4 billion.
- 2026 Forecast: Improved slightly from $24.6 billion to $24.49 billion.
Market Reactions and Outlook
Economists remain cautious about the pace of rate cuts, with Haluk Bürümcekçi noting that the Central Bank may opt for a more measured approach than markets anticipate, considering inflation risks.
With inflation moderating and economic growth expectations rising, the Central Bank’s future rate decisions will likely depend on how disinflation trends unfold and whether fiscal policies align with monetary measures.