Turkish Economy Will Likely Grow by Around 3.8% in 2025
Bottom Line: The Turkish Statistical Institute (TUIK) is scheduled to announce Q4 2024 and full-year GDP growth on March 2. We expect the Turkish economy expanded by approximately 3.8% y/y in 2025, underpinned by resilient household consumption, investment, and ongoing construction projects. Domestic demand likely remained the primary growth driver in Q4, while the main drag came from net trade, as export growth of 5.3% y/y was outpaced by a 6.7% surge in imports. Looking ahead, we anticipate GDP growth will maintain a steady pace in 2026, supported by robust consumption and government spending. However, significant downside risks remain due to sustained high interest rates and contractionary fiscal measures.
Figure 1: GDP (%, YoY), Q1 2022 – Q3 2025
Source: Continuum Economics
Despite stubborn inflation and high interest rates continued to weigh on real consumer demand, Turkiye's GDP growth hit 3.7% y/y in Q3 2025. (Note: Final consumption expenditure by resident households surged by 4.8% y/y and fixed investments edged up to their highest in two years with increasing 11.7% y/y. The main drag came from net trade).
TUIK is scheduled to announce the Q4 2025 and full-year GDP growth figures on March 2, 2026. We anticipate the Turkish economy expanded by approximately 3.8% y/y in 2025, underpinned by resilient household consumption and investment. This performance would see 2025 growth exceed the 3.3% target set in the Medium-Term Program (MTP). While domestic demand likely remained the primary growth driver in Q4, the pace of expansion may have cooled slightly compared to earlier quarters due to the sustained high-interest-rate environment.
In Q4 2025, net trade acted as a drag on growth as exports rose by 5.3% y/y (up from -0.7% in Q3), while imports climbed by 6.7% y/y (up from 4.3% in Q3). Consequently, the trade deficit widened by an average of 12.8% during the final quarter. For the full year 2025, the total deficit reached $92.0 billion, representing an 11.9% increase compared to 2024. This Q4 acceleration in imports—highlighted by a nearly 11% surge in December—was attributed by the Ministry of Trade to rising gold prices and steady demand for intermediate goods.
Looking ahead, supported by the anticipated positive impact of rate cuts and improving business sentiment, we expect GDP growth to maintain its momentum in 2026, driven by resilient household consumption, infrastructure projects, and government spending. However, significant downside risks remain, particularly in H1 2026. Growth may remain under pressure due to sustained high interest rates, contractionary fiscal measures, and stringent macroprudential policies aimed at curbing elevated inflation. These domestic headwinds are further compounded by a challenging global outlook and the ongoing geopolitical risks stemming from the Russia-Ukraine war.