Bank of America Forecasts Stronger Growth and Lower Inflation for Turkey in 2026

Bank of America (BofA) Global Research has released its updated macroeconomic outlook for the Turkish economy, outlining growth, inflation, interest rates, and fiscal balance expectations for 2025 and 2026. The projections suggest a gradual strengthening of economic activity, continued disinflation, and a cautious easing of monetary policy, signaling a more stable macroeconomic trajectory compared to recent years.

According to the report, Turkey’s real Gross Domestic Product (GDP) is expected to expand by 3.7% in 2025 and accelerate further to 4.3% in 2026. These forecasts indicate that Turkey is likely to outperform many of its emerging-market peers, driven by domestic demand, improving financial conditions, and a more predictable policy framework.

Growth Outlook: Momentum Builds Into 2026

BofA’s growth projections reflect expectations of a recovery that gains pace over time rather than peaking quickly. The anticipated 4.3% GDP growth in 2026 points to stronger investment activity and a gradual normalization of consumption as inflation pressures ease.

Analysts note that while tight monetary conditions may continue to restrain growth in the near term, the lagged effects of earlier policy adjustments are expected to support economic expansion in the medium term. Export performance, tourism revenues, and resilient services sector activity are also seen as key contributors to sustained growth.

Inflation Expected to Decline Sharply

One of the most closely watched indicators in the report is inflation. BofA forecasts consumer inflation at 24.0% by the end of 2026, a significant decline compared to recent elevated levels. This projection reinforces expectations that the disinflation process will continue, provided fiscal discipline and monetary credibility are maintained.

Lower inflation is expected to improve purchasing power, stabilize expectations, and reduce uncertainty for households and businesses alike. Analysts emphasize that a sustained decline in inflation would be a critical milestone for restoring confidence in Turkey’s macroeconomic management and attracting longer-term investment flows.

Policy Rate Seen Falling to 30%

In line with easing inflation pressures, BofA expects the Central Bank of the Republic of Turkey (CBRT) to gradually reduce interest rates. According to information cited by Matriks Haber, the policy rate is projected to decline to 30% by the end of 2026.

This outlook suggests a cautious and measured easing cycle rather than aggressive rate cuts. BofA’s scenario implies that monetary policy will remain tight enough to anchor inflation expectations, while still allowing room to support growth as price stability improves.

Market participants see this balance as critical. A controlled reduction in interest rates could help revive credit activity and investment without reigniting inflationary risks.

Fiscal Discipline Remains a Key Anchor

On the fiscal side, BofA’s projections indicate a relatively contained budget deficit. The budget deficit-to-GDP ratio is expected to reach 2.9% in 2025 and rise modestly to 3.1% in 2026.

These figures suggest that while public spending pressures remain, particularly due to social transfers and reconstruction needs, fiscal policy is expected to stay broadly disciplined. Analysts highlight that maintaining budget deficits near these levels would help limit public debt accumulation and support macroeconomic stability.

Current Account Deficit to Widen Slightly

The report also addresses external balances, forecasting a modest deterioration in the current account deficit. BofA expects the current account deficit to increase from 1.5% of GDP in 2025 to 1.7% in 2026.

This slight widening is attributed to stronger domestic demand and higher import volumes as economic growth accelerates. However, the projected levels remain relatively moderate by historical standards, especially when compared to periods of sharp external imbalances in Turkey’s past.

Tourism revenues, energy price dynamics, and export performance are expected to play a crucial role in keeping the current account deficit under control.

What the Outlook Means for Investors

BofA’s macroeconomic projections paint a picture of gradual normalization rather than a dramatic turnaround. Stronger growth, falling inflation, easing interest rates, and manageable fiscal and external deficits together suggest an improving risk profile for Turkey.

For investors, the combination of GDP growth above 4%, declining inflation, and a predictable monetary policy path could enhance the appeal of Turkish assets, particularly equities and longer-dated local-currency instruments. However, analysts caution that maintaining policy consistency will be essential for these forecasts to materialize.

A Measured Optimism for 2026

Overall, Bank of America’s outlook reflects cautious optimism about Turkey’s economic direction. While structural challenges remain, forecasts for 2026 growth, inflation, interest rates, and the fiscal balance suggest Turkey may be entering a period of greater macroeconomic stability.

If the projected trends hold, 2026 could mark a year in which economic growth becomes more balanced, inflation pressures ease meaningfully, and confidence gradually returns to both domestic and international markets.