EU Commission Reveals New Forecasts for the Turkish Economy
The European Commission has published its "European Economic Forecasts, Autumn 2024" report prepared for EU member and candidate countries. According to the report, Turkey's economy is expected to grow by 3% in 2024, with average inflation projected to reach 59.8%.
Revised Economic Growth Expectations
In the previous "European Economic Forecasts, Spring 2024" report, the EU had estimated that Turkey's economy would grow by 3.5% in 2024 and that average inflation would be 57.4%. However, in the autumn report, these forecasts have been updated, and the growth expectation has been revised down to 3%. This change arose due to fluctuations and uncertainties in the Turkish economy.
The GDP growth forecast for 2025 has also been lowered from 3.8% to 3.2%, while growth is projected to be 4% in 2026. The report indicates that the average inflation forecast for 2025 has been adjusted from 31.5% to 30.8%, with an inflation expectation of 17.8% for 2026.
Expected Slowdown in Domestic Demand
The Commission's report suggests that following the slowdown in economic activity observed in the second quarter, the pressure of tight policy stance on domestic demand is expected to continue. Household consumption is anticipated to remain limited due to a slowdown in employment growth and the annual reset of the minimum wage.
In a high-interest environment, despite the reconstruction efforts following the earthquake, fixed investments are expected to go through a slow initial process but are anticipated to accelerate by the end of 2025 with the strengthening of macroeconomic stability. It is also noted that public consumption will follow a similar trend due to policies aimed at reducing inflation and maintaining a tight fiscal stance. The report emphasizes that weak domestic demand will lag behind export growth and will exert pressure on import growth.
Soft Landing Scenario
The European Commission maintains that its baseline scenario for the Turkish economy remains a 'soft landing'. Overall, moderate growth and declining inflation are projected. The Commission highlights the importance of Turkey's macroeconomic policies focusing on sustainable and balanced growth. In this context, it is stated that economic reforms and structural transformations need to be supported.