Turkey Country Risk Rating

Turkiye’s overall risk level is high. Political violence and interference remain at a very high and medium-high level respectively. Following the judicial mandate seeking a 2,400-year sentence for opposition presidential candidate Ekrem Imamoglu, opposition support has moved elsewhere and some are following the fortunes of Ozguer Ozel of Yeni. President Erdogan continues to want to dominate Turkish politics however and is using the international stage to project statesmanship. The Pakistan-Saudi Arabia-Turkiye joint defence pact agreement and Erdogan’s friendship with U.S. president Trump are being used to underpin domestic support. Legal & regulatory risk remains at a medium-high level as the judiciary are alleged to be increasingly used as a tool for opposition political control. Linked with this, doing business remains at a medium risk level due to concerns over domestic politics. The Turkish economy has been able to weather the high energy prices caused by the Iran war and the IMF projects 2026 GDP growth at 3.4%. Meanwhile, inflation is forecast to slow to 28.6% in 2026, with some lagged disinflation from tight monetary policy but still some stickiness related to reasonable domestic demand. This domestic demand also is sustaining imports and leaves the current account deficit at around 2.8% in 2026. Thus despite the pick-up in FX reserves over the last few months, the Turkish Lira maintains some vulnerability should politics or the economy deteriorate. One economic issue to watch is whether President Erdogan decides on an early presidential election in October 2027 and seeks politically motivated interest rate cuts from the CBRT next year. Meanwhile, supply chain disruptions persist at an elevated level, driven in part by regional conflicts and disputes. Finally, sovereign non-payment risk and fiscal stimulus inability have stabilized at a medium level reflecting a disciplined fiscal consolidation.