Türkiye’s Economic Growth Slows to 2.3% in Q1

Türkiye’s economy is expected to have expanded by 2.3% in the first quarter of 2025, falling short of government expectations, according to a new Reuters poll released Tuesday. The forecast also suggests that full-year growth for 2025 will land around 3%, trailing the official projection of 4%.

In comparison, the economy grew by 3% in Q4 2024 and registered a 3.2% increase over the entire previous year. The latest poll surveyed 10 economists, with their first-quarter GDP growth estimates ranging between 1.5% and 3.2%, and a median forecast of 2.3%.

Slowing Momentum Amid Monetary Tightening

This deceleration in economic activity reflects the impact of tight monetary policy, which Türkiye’s central bank began adjusting in response to mounting inflationary pressures and political turbulence.

After holding the benchmark interest rate at 50% for eight months, the bank initiated a brief easing cycle in December 2024. But this was swiftly reversed when market instability followed the arrest of Istanbul Mayor Ekrem İmamoğlu, a prominent opposition figure and President Erdoğan’s key political rival. In March and April, the central bank raised interest rates by a total of 350 basis points, bringing the lending rate to 49%.

Although these measures helped curb inflation—which had surged as high as 75% in May 2024—they also dampened economic growth.

Economists Predict Modest Recovery

Economists surveyed by Reuters anticipate gradual easing to resume this summer, though with limited interest rate cuts through the rest of the year. Analysts note that while tight fiscal and monetary policies have stabilized inflation, they could also weigh further on GDP growth.

In its research note, Goldman Sachs warned that the Turkish economy lost some growth momentum in the first quarter. The report highlights that household consumption was the primary driver, fueled by expansionary fiscal spending in the second half of 2024 and monetary loosening late last year.

Goldman cautioned, however, that the central bank’s renewed focus on slowing domestic demand to achieve disinflation may not persist long enough to curb momentum significantly:

“We are sceptical that policy will remain tight for long enough to reduce momentum meaningfully,” the bank stated.

Official Data Expected Friday

The Turkish Statistical Institute (TurkStat) is scheduled to release official Q1 2025 GDP data on Friday at 0700 GMT, which will confirm the extent of Türkiye’s slowing economy amid ongoing fiscal adjustments and political uncertainty.