17.11.2025
Economic growth in Turkey is projected to slow to 3.4% in 2025 but to remain resilient in 2026 and pick up to 4.0% in 2027, driven mainly by domestic demand. Private consumption is forecast to remain the main growth engine, supported by wealth effects and continued employment gains, while investment is expected to expand steadily as financial conditions and prospects improve. Inflation, while declining from very high levels, is expected to come down only slowly due to sticky services inflation and elevated inflation expectations, averaging 24.8% in 2026 and 17.7% in 2027. The general government deficit is projected to remain around 3% of GDP over the forecast horizon, while gross public debt is expected to stay moderate at around 24% of GDP.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 3.4 | 3.4 | 4.0 |
| Inflation (%, yoy) | 35.2 | 24.8 | 17.7 |
| Unemployment (%) | 8.6 | 8.6 | 8.6 |
| General government balance (% of GDP) | -3.1 | -3.1 | -2.8 |
| Gross public debt (% of GDP) | 24.2 | 24.2 | 23.9 |
| Current account balance (% of GDP) | -1.5 | -1.6 | -1.9 |
Moderate domestic demand to drive economic growth
Real GDP growth in 2024 was revised slightly upward following a national accounts revision, and domestic demand remained robust in the first half of 2025 despite financial market turmoil linked to domestic political tensions. Household consumption stayed resilient and investment growth strengthened, supported by machinery and equipment and persistently strong construction activity. Growth is projected to slow to 3.4% by the end of 2025, before remaining resilient in 2026 and picking up to 4.0% in 2027. Private consumption is expected to remain the main growth driver, supported by wealth effects (including high gold prices) and continuing employment gains, while investment is set to expand steadily as post-earthquake reconstruction tapers and broader financial conditions improve. Net exports’ contribution to growth is projected to be close to zero, and the trade and current account deficits are expected to remain broadly stable over the forecast horizon.
Limited employment growth set to keep the labour market slack elevated
The labour market remained broadly stable in the first half of 2025, with job gains in construction and services offset by losses in agriculture and industry. Employment growth is expected to pick up only slowly and remain marginal, leaving the unemployment rate broadly unchanged at around 8.6%. Cost pressures are projected to stay relatively contained given elevated underemployment and a large potential labour force.
Disinflation remains a priority, but it faces hurdles
Despite falling from very high levels, inflation remained elevated and surprised on the upside in 2025, driven by higher food prices linked to adverse weather conditions, sticky services inflation, elevated inflation expectations, and wealth effects from rising gold prices. While tight monetary policy continues to underpin the disinflation strategy, inflation is expected to come down only slowly, averaging 24.8% in 2026 and 17.7% in 2027.
Fiscal consolidation to advance slowly
The medium-term fiscal framework was revised in 2025, raising the central government deficit target, while the general government deficit is projected to remain around 3% of GDP over the forecast horizon. The tighter fiscal stance net of earthquake-related spending is expected to be mildly supportive of disinflation, while government indebtedness is forecast to remain moderate at around a quarter of GDP, although longer-term sustainability concerns persist, including for the social security system.
Risks have come down but are still high
While markets stabilised after the spring turmoil and policy buffers have improved, the political situation remains volatile and risks remain elevated. A recent track record of sound policies and lower imbalances could help Turkey withstand challenges if the orthodox policy course is maintained.
Source: European Commission. European Economic Forecast, Autumn 2025.
