Ready for a year of two halves?
In this last quarterly/forecast report of the year, we provide a quick overview of the macroeconomics of 2025 and share our preliminary baseline scenario for 2026, the latter including our political risk map for the year.
2025 has played out broadly as expected, with inflation now likely to finish the year at just over 31%, once again much above CBRT forecasts from about a year ago. At some 3.7%, growth turned out stronger – stronger than we had envisaged at least, but Turkey’s secular growth rate is on a downward trend, we think. The current account deficit has likely widened to some 1.5% of GDP this year --up from 0.8% last year, but as expected, it has not constituted a major threat to CBRT’s disinflation strategy -- of trying to engineer disinflation through relative USD/TL stability.
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2026 will likely be one of those years with “two halves”, we surmise for now, combining a relatively calm first half with a more volatile second. “Carry trade” conditions should prevail during the first half -- perhaps even thereafter, whereby the CBRT sticks to its de facto “real exchange rate rule” and locals, in particular, continue to take political risks in their stride. In the second half or by late 2026, things could get trickier, however, as growing political tensions, approaching early elections and lower policy rates lead to heightened volatility.
Now read on...
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