IMF Surprises Markets With Dual Upgrade for Turkey: What’s Driving the Shift?

The International Monetary Fund (IMF) has delivered a notable reassessment of Turkey’s economic outlook, revising its growth forecasts upward for both the current year and the year ahead. In its January 2026 World Economic Outlook (WEO) update, the IMF raised Turkey’s expected growth rate for this year from 3.7% to 4.2%, while also lifting its 2027 projection from 3.7% to 4.1%. The dual revision stands out amid moderate global growth expectations and downside risks that continue to dominate the broader outlook.

The updated report, released under the headline “Global Economy: Steady Amid Diverging Forces,” paints a picture of a world economy that is holding up better than previously anticipated, despite persistent headwinds from trade tensions, geopolitical risks, and financial vulnerabilities. Within this global context, Turkey emerges as one of the economies benefiting from a more favorable reassessment.

Global Growth Outlook Revised Upward

Alongside country-specific revisions, the IMF also adjusted its global growth expectations. The Fund now projects the world economy to expand by 3.3% in 2026 and 3.2% in 2027, signaling a continuation of what it describes as a “resilient” growth trajectory. Compared with the IMF’s October 2025 forecast, global growth for this year has been revised upward by 0.2 percentage points, while expectations for 2027 remain unchanged.

According to the IMF, this relative stability results from offsetting forces. On one side, changing trade policies and renewed protectionist pressures are weighing on economic momentum. On the other hand, rising investments in technology—particularly artificial intelligence—along with fiscal and monetary support and generally accommodative financial conditions, are helping to counterbalance these negative factors. The IMF also highlights the private sector’s ability to adapt as a key stabilizing force.

Inflation Expected to Ease Gradually

The report also offers updated inflation projections, suggesting a gradual cooling in global price pressures. Global headline inflation, estimated at 4.1% for 2025, is expected to decline to 3.8% in 2026 and to 3.4% in 2027. These projections are broadly in line with the IMF’s earlier estimates, indicating that disinflation remains on track, albeit unevenly across regions.

The IMF notes that the return of inflation to target levels is likely to be more gradual in the United States compared with other major economies. This divergence reflects differences in labor market tightness, demand conditions, and monetary policy transmission across advanced economies.

Risks Still Tilted to the Downside

Despite the improved growth forecasts, the IMF emphasizes that risks to the outlook remain skewed to the downside. One of the key uncertainties relates to artificial intelligence. While AI-driven investments are currently supporting growth expectations, a reassessment of productivity gains could dampen investor enthusiasm. Such a shift could trigger a broader market correction, spilling over from AI-linked companies into other sectors.

Trade tensions also remain a significant threat. A renewed escalation in global trade disputes could prolong uncertainty and exert stronger pressure on economic activity. In addition, the IMF warns that domestic political tensions or geopolitical flare-ups could disrupt financial markets, supply chains, and commodity prices, adding further instability to the global economy.

Another structural risk highlighted in the report is the rise in budget deficits and public debt across many countries. Elevated borrowing levels could push up long-term interest rates, tightening financial conditions and constraining growth over the medium term.

A More Optimistic Scenario Hinges on Technology and Trade

On the upside, the IMF outlines a more optimistic scenario in which economic activity accelerates further. This would depend on stronger-than-expected gains from AI-related investments, faster adoption of new technologies, and sustained productivity improvements. If these developments translate into greater business dynamism and labor market efficiency, they could underpin more durable and inclusive growth.

A lasting easing of trade tensions would also support this positive outlook, reinforcing confidence and encouraging cross-border investment and production.

Turkey’s Growth Outlook Revised Upward

Against this global backdrop, the IMF’s reassessment of Turkey’s economic growth stands out. The Fund now expects the Turkish economy to grow by 4.2% this year and 4.1% next year, marking a clear improvement from its October 2025 projections, which had placed growth at 3.7% for both years.

The upward revision suggests increased confidence in Turkey’s near-term economic momentum, potentially reflecting factors such as domestic demand resilience, investment dynamics, and external conditions. While the IMF does not detail Turkey-specific drivers, the dual upgrade positions Turkey among the economies benefiting from the broader recalibration of global growth expectations.

Revisions for Major Economies

The IMF also updated its forecasts for several major economies. U.S. growth is now expected to reach 2.4% this year, up from 2.1%, before easing to 2.0% next year. The Euro Area outlook was modestly improved, with growth revised to 1.3% for this year, while the 2027 projection remains at 1.4%.

Within Europe, Germany’s growth forecast was raised to 1.1%, France’s to 1.0%, while Italy saw a slight downward revision for this year. Spain emerged as a relatively bright spot, with growth expectations lifted for both years.

Among emerging markets, China’s growth forecast was increased to 4.5% for this year but reduced to 4.0% for next year, signaling near-term strength but longer-term moderation. India’s outlook was also revised upward, while Russia’s growth projections were trimmed.