Turkey’s Q1 Economic Growth Seen at 2.3 per cent, Full-Year at 3 per cent

The big emerging market economy expanded by 3 per cent in the fourth quarter and 3.2 per cent in 2024 a whole. Estimates of ten economists in the Reuters poll for the first quarter ranged from 1.5 per cent to 3.2 per cent, with the median at 2.3 per cent gross domestic product (GDP) growth.

Economists forecast an expansion of 3 per cent this year, slightly lower than last year, the poll showed, reflecting the effects of monetary tightening.

In December, the central bank started an easing cycle after having kept the main policy rate steady at 50 per cent for eight months. Inflation has dipped from as high as 75 per cent last May.

In March and April, the bank tightened its policy rate by 350 basis points and raised the lending rate to 49 per cent in response to market turmoil that erupted over the arrest of Istanbul Mayor Ekrem Imamoglu, President Tayyip Erdogan’s main political rival.

Economists expect the central bank to return to easing this summer albeit with fewer cuts throughout the year. While the tight policy has helped cool inflation, it has the potential to also cool economic growth, which is already under pressure from global trade wars.

The government has forecast 4 per cent economic growth this year.

In a research note, Goldman Sachs said economic growth lost some momentum in the first quarter and that the monetary tightening since March has increased downside risks.

“Activity was driven predominantly by household consumption in Q1, supported by expansionary fiscal policy since the H2 last year and monetary easing since December,” the Wall Street bank said.

The central bank is now “focusing more on the need for a demand slowdown for further disinflation,” Goldman added. “However, we are sceptical that policy will remain tight for long enough to reduce momentum meaningfully.”

The Turkish Statistical Institute is expected to release the official Q1 GDP data at 0700 GMT on Friday.

Source: Reuters