OECD has raised its growth forecast for Turkey

The Organisation for Economic Co-operation and Development (OECD) has raised its growth expectations for the Turkish economy for 2023 and 2024.

According to the “Economic Outlook” report published by the OECD, following a strong first half of the year, economic growth is expected to reach 4.5% in 2023, slowing down to 2.9% in 2024 and further to 3.2% in 2025. In September, the OECD had previously stated Turkey’s growth expectations at 4.3% for this year and 2.6% for the next.

According to the OECD, tighter fiscal conditions, suppressed economic sensitivity, and persistent high inflation will slow household consumption. However, due to ongoing reconstruction activities following earthquakes earlier in the year, investment growth will remain high.

The institution predicts that exports will gain momentum in 2025, inflation will decline during the projection period but remain quite high.

The OECD increased its consumer price expectations for 2023 from 52.1% to 52.8%, for 2024 from 39.2% to 47.4%, and projected 31.6% for 2025.

The core consumer price expectation, excluding food and energy, was revised from 56.7% to 56.4% for this year, raised from 40.0% to 47.7% for next year, and predicted to drop to 31.6% in 2025.

In the OECD report, it was noted that “Interest rates are expected to rise further as long as the Central Bank of the Republic of Turkey remains committed to tightening monetary policy until significant improvement is achieved in the inflation outlook. Meanwhile, the government continues its fiscal consolidation measures to stabilize public finances. Accelerating labor supply reforms will support ongoing efforts to stabilize the macroeconomic framework.”

The OECD revised the current account deficit to GDP ratio from -4.7% to -4.1% for this year, from -3.3% to -3.0% for next year, and set the forecast for 2025 at -2.5%.