BBVA Maintains Türkiye’s 2025 Growth Forecast at 3.5% Despite Downside Risks

BBVA Research has reaffirmed its 3.5% GDP growth forecast for Türkiye in 2025, despite acknowledging the presence of significant downside risks. In its latest economic outlook, the bank highlighted that tighter financial conditions and weakening external demand are dampening domestic activity, especially as Q2 2025 unfolds.

Economic Slowdown Broadens Across Sectors

The report emphasized that April’s hard data confirmed a broad-based deterioration across various sectors. Furthermore, leading indicators for May and June, particularly confidence indices, suggest that the economic slowdown will intensify in Q2 2025.

According to BBVA, this may cause the output gap to deepen and potentially turn negative — a scenario that could support the disinflation outlook projected in the Central Bank of Türkiye’s (CBRT) latest monetary policy stance.

Weak Domestic Demand, Stagnant Exports

BBVA noted a continued decline in private consumption, while investment activity showed some signs of recovery. However, forward-looking indicators signal an ongoing correction in domestic demand.

On the external front, weak global demand is expected to keep exports flat in Q2, while imports are gradually normalizing due to subdued domestic consumption. Still, net exports may drag on overall growth on a quarterly basis.

Growth Estimates: Quarterly and Annual

BBVA’s monthly GDP tracker anticipates quarter-on-quarter growth between 0% and 0.5% in Q2 2025. On a year-over-year basis, growth may reach 4.5%, partly due to favorable calendar effects.

Downside Risks Cloud the Outlook

The outlook warns of several short-term risks, including:

• Tight financial conditions

• Geopolitical tensions

• Uncertainty surrounding global protectionist policies

Nonetheless, BBVA identifies several supportive elements that could cushion the economy:

• Increased infrastructure and defense spending in the EU

• Potential extension of Türkiye’s Credit Guarantee Fund (CGF) limits

• Possible monetary easing in the second half of 2025

In conclusion, while BBVA Research acknowledges the growing headwinds, it remains cautiously optimistic, holding firm to its 2025 Türkiye GDP growth projection of 3.5%.