Turkey’s 2025 GDP Growth Driven by Consumer Spending, Raising Inflation Concerns
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Turkey’s economy expanded by 3.6% in 2025, according to official data, maintaining a steady pace compared to the 3.3% growth recorded in 2024. However, analysis from major Turkish brokerage houses highlights a shift away from a balanced growth composition, with strong domestic demand driving the figures while net exports remain a significant drag on the economy.
Q4 2025 Performance Falls Slightly Short
In the final quarter of 2025, GDP growth slowed to 3.4% year-on-year, performing slightly below market expectations of 3.6%. On a quarter-on-quarter basis, seasonally and calendar-adjusted GDP grew by 0.4%, indicating a deceleration in economic activity.
Breakdown of Growth Dynamics
Analysts from Is Yatirim noted that the growth composition is becoming unbalanced, driven heavily by household consumption rather than a mix of investment and exports:
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Household Consumption: Surged by 4.2% quarter-on-quarter, the second-highest reading since the start of the disinflation program in Q3 2023. This rapid acceleration, likely boosted by wealth effects from gold price shocks, raises concerns that inflation may not fall as fast as anticipated by the Central Bank.
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Foreign Trade: Exports suffered a sharp contraction of 4.5% quarter-on-quarter, while imports grew by 4.3%, resulting in net exports subtracting 1.9 percentage points from quarterly growth.
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Investment: Investment expenditures saw a limited contraction of 0.3% quarter-on-quarter, with machinery and equipment investments lagging behind construction activities.
Brokerage Views and Outlook
Garanti BBVA emphasized that while domestic demand remains resilient, the continued decline in investment and the negative contribution of foreign trade pose risks to the economic outlook. They highlighted that the strong contribution of private consumption to growth creates question marks regarding future inflation dynamics. Despite these risks, Garanti BBVA maintains a 4.0% growth forecast for 2026, closely monitoring the impact of geopolitical developments on tourism and exports.
Rate Cuts at Risk as Oil Shock Clouds Türkiye’s Monetary Outlook
Gedik Yatirim maintains a 3.5% growth forecast for 2026, citing leading indicators like credit card spending and tax collection that suggest consumer demand remained strong entering the first quarter of 2026.
Isbank Economic Research noted that while industrial production slowed, investment expenditures continued to contribute positively to growth. They emphasized that the course of growth in 2026 will heavily depend on how geopolitical developments affect commodity prices and global demand conditions.
