EU Commission Lowers Turkey's Economic Growth Forecast for 2024, Raises Inflation Estimate

The European Commission's "Economic Forecasts for Europe, Autumn 2024" report presents a growth forecast of 3.0% for the Turkish economy in 2024. It estimates that average inflation will be 59.8%.

In its earlier "Economic Forecasts for Europe, Spring 2024" report published in the first half of this year, the EU had predicted that the Turkish economy would grow by 3.5% this year, with an average inflation rate of 57.4%.

For 2025, the Commission has revised its GDP growth forecast down from 3.8% to 3.2%, while projecting growth to be 4.0% in 2026. It has also reduced its average inflation forecast for 2025 from 31.5% to 30.8% and announced a 17.8% inflation forecast for 2026.

In the "Autumn 2024" report, the Commission stated the following regarding Turkey: "Following a slowdown in economic activity in the second quarter, it is anticipated that the tight policy stance will continue to exert pressure on domestic demand. It is expected that the tight policy stance will also reduce domestic demand in the coming year. Household consumption is expected to be constrained due to the slowdown in employment growth and the annual adjustment of the minimum wage to a single index. Despite ongoing reconstruction efforts following the recent earthquakes, fixed investments are expected to undergo a soft period in the near term, only expected to accelerate by the end of 2025 with strengthened macroeconomic stability. Public consumption, which is constrained by the necessity to reduce inflation and maintain a tight fiscal stance, is also expected to follow a similar pattern. Relatively weak domestic demand is projected to put pressure on import growth, which is expected to lag behind export growth throughout the period. Overall, the 'soft landing' scenario, characterized by moderate growth and declining inflation, remains the baseline scenario for the economy."

Forecasts included in the EU Commission's Autumn 2024 Report. Forecasts included in the EU Commission's Spring 2024 Report.