Turkiye GDP Growth Preview: Economy will Expand by Around 4% in Q3
Bottom Line: Turkish Statistical Institute (TUIK) will announce Q3 GDP growth on December 1 and we expect that Turkish economy will expand around 4.0% YoY backed by investments, strong construction and industry activities in Q3. Of course, growth figure could hit below our expectations due to the weight of high interest rates, stubborn inflation, and adverse geopolitical developments, but this is not our major scenario.
Figure 1: GDP (%, YoY), Q1 2020 – Q2 2025
Source: Continuum Economics
Despite stubborn inflation and high interest rates continue to weigh on real consumer demand along with subdued external demand due to the tariff-related drag on global activity, Turkish economic growth outpaced market expectations and hit 4.8% YoY in Q2.
We now foresee GDP will likely grow by around 4.0% in Q3 backed by investments, strong construction and industry activities in Q3. Of course, growth figure could hit below our expectations due to stubborn inflation, and adverse geopolitical developments, but this is not our major scenario.
Supported by positive impacts of the rate cuts and increasing business confidence assuming no dramatic impact from weaker external demand, we think GDP growth will remain its pace heading towards 2026. There is still a downside risk that growth will remain under pressure in Q4 2025 and in 2026 due to high interest rates, contractionary fiscal actions and additional macro prudential policies to fight against the elevated inflation coupled with adverse global outlook. Additionally, the continuation of Russia-Ukraine war will be an important risk factor.
We think a drop in the inflation rate and rate cuts could further boost confidence, which moderately started in Q3, and ignite growth to rise back toward potential of 3.5%-4% after 2026.