Dollar 52, Inflation 23%: BBVA’s Shocking Türkiye Outlook

International banking giant BBVA has delivered a striking update on Türkiye’s economy, projecting higher growth in 2025 but warning of persistent inflation and a weakening lira in the years ahead.

The newly published “Türkiye Economic Outlook” (September 2025) report outlines stronger-than-expected momentum for the economy, yet highlights the dangers of sticky service-sector inflation and an ever-rising USD/TRY exchange rate.

Growth Upgraded, Inflation Still a Threat

BBVA raised its 2025 GDP growth forecast to 3.5–4%, citing stronger-than-anticipated data from the second quarter. For 2026, growth is expected to hold steady at 4%.

But optimism is tempered by inflation concerns.

• The bank now expects year-end 2026 inflation at 23%, up from its previous 21% projection.

• The upward revision stems from rigid service prices and anticipated administrative price hikes at the start of 2026.

Central Bank Holds the Key

The report praises the Central Bank of Türkiye (TCMB) for maintaining a strong reserves position and positive real interest rates, describing them as critical buffers against short-term market volatility.

However, BBVA believes the pace of rate cuts will slow:

• Policy rate forecast: 36.5% at end-2025

• Policy rate forecast: 30% at end-2026

This gradual easing, BBVA says, will be accompanied by macroprudential measures to stabilize financial conditions.

Dollar/TL Projections Raise Eyebrows

Perhaps the most attention-grabbing forecast concerns the USD/TRY exchange rate:

• 45 at end-2025

• 52 at end-2026

Such a trajectory suggests the lira will continue to lose ground, even as growth stays positive. For businesses and households, this means import costs and inflationary pressures will remain an ongoing challenge.

Bigger Picture: Growth vs. Stability

BBVA’s outlook reflects a dual reality:

• Türkiye’s economy is showing remarkable resilience, supported by strong exports, domestic demand, and investment.

• Yet, inflationary stickiness and a structurally weak currency could keep the economy under pressure.

This tension highlights the delicate balancing act facing policymakers: sustaining growth while preserving monetary credibility and price stability.

What Comes Next?

As Türkiye heads into 2026, investors and policymakers will be closely watching:

• TCMB’s next moves on interest rates

• The government’s approach to service sector pricing and wage adjustments

• Global energy and commodity prices, which could amplify domestic inflation

For now, BBVA’s projections paint a picture of an economy that is expanding, but far from escaping inflationary gravity.