OECD growth and inflation forecasts for Turkey

The OECD revised its 2024 growth forecast for the Turkish economy upwards, while projecting average inflation to be 55.5 per cent in 2024 and 28.9 per cent in 2025.

In February, the OECD estimated that the Turkish economy would grow by 2.9 per cent in 2024, while it updated this forecast to 3.4 per cent. It maintained its 2025 growth forecast at 3.2 per cent.

The OECD also predicted that average inflation in Turkey would be 55.5 per cent in 2024 and 28.9 per cent in 2025. Core inflation was forecast to average 57.5 per cent and 28.7 per cent in 2024 and 2025, respectively.

The OECD report made the following assessments for Turkey:

“Tightening financial conditions and the negative impact of inflation on purchasing power will reduce household consumption. Investment activity is expected to remain strong, partly due to the ongoing reconstruction following the 2023 earthquake. Exports will gradually strengthen, reflecting the improving external environment. Inflation peaked earlier this year but will remain high in 2024 and 2025.

Fiscal policy is expected to be contractionary after a significant increase in the deficit in 2023, partly due to earthquake-related expenditures. Monetary policy has rightly become restrictive and the key interest rate has cumulatively increased by 41.5 percentage points since May 2023. However, if inflation remains high, further monetary and fiscal tightening may be necessary. Structural reforms could support efforts to stabilise macroeconomic conditions and boost long-term growth potential. In particular, labour market reform will help boost high-quality formal job creation.