ISTANBUL (Reuters) -Turkey’s economic growth is seen slowing this year while inflation will stay higher than government forecasts despite tight policy, a Reuters poll of economists showed.
Growth in gross domestic product is expected to be 2.8% this year, slower than 3.2% in 2024, before picking up to 3.3% in 2026, according to the median forecast of 34 economists in the July 18-23 Reuters poll.
Based on its three-year policy roadmap published last September, the government predicts 4.0% GDP growth this year and 4.5% next.
A depreciation in the lira, robust domestic demand and rising taxes boosted inflation in 2024, pushing it to an annual peak of 75.45%, but with the help of tight policy and fiscal measures it fell to around 35% in June this year.
Poll medians showed annual inflation falling to 30% this year and 21% by the end of 2026. The central bank forecasts inflation to fall to 24% at the end of this year, with an upper band of 29%.
The central bank tightened policy in April following market volatility over the arrest of the Istanbul mayor, reversing an easing cycle that had begun in December. The central bank also implemented liquidity measures to set the overnight funding rate higher than the policy rate, effectively tightening policy more.
With the fall in inflation, economists expect the central bank to return to its easing cycle in its monetary policy committee meeting on Thursday. The policy rate is seen to be cut by 250 basis points from the current 46%, according to an earlier poll.
In the latest long-term poll, medians put the key rate at 41% at end-September and 36% by the end of this year. The poll sees the central bank continuing to cut rates next year, leaving it at 23% by end-2026.
“After two more 250bp cuts in September and October, we expect the central bank to lower the pace of cuts to 150bp in the last MPC meeting of the year, on 11 December, due to a smaller ex-post real policy rate cushion,” Barclays said in a note.
Turkey’s current account deficit is expected to be 1.5% of GDP this year and 1.6% next, median forecasts in the poll showed.
(Other stories from the global economic poll)
(Polling by Renusri K; Writing by Ezgi Erkoyun, editing by Ed Osmond)
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