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EBRD lowers Turkey’s 2024 growth rate

Turkey's economic growth is projected at 3 percent in 2025 Reuters/Umit Bektas
Turkey's economic growth is projected at 3 percent in 2025

The European Bank for Reconstruction and Development (EBRD) has lowered Turkey’s economic growth forecast to 2.7 percent from 3 percent for 2024, due to rising inflation.

However, a recovery is anticipated next year, with growth projected at 3 percent, driven by potential monetary and fiscal policy tightening aimed at curbing high inflation.

Turkish economic policy has tightened, with tax increases and stronger macro-prudential policy measures. Since June 2023, the central bank has raised its policy rate nine times to 50 percent from 8.5 percent.

The services sector was the primary growth driver last year, with post-earthquake reconstruction efforts also contributing.

Inflation stood at 69 per cent in March 2024.

The medium-term programme, launched in September 2023, intends to achieve price stability and single-digit inflation, finance minister Mehmet Şimşek said in February.

A return to more orthodox policy since June 2023 has improved confidence among domestic and international investors, following Turkey’s first sovereign rating upgrade in over a decade.

Global rating agency Fitch upgraded Turkey’s long-term foreign currency issuer default rating to “B+” from “B”, driven by greater-than-expected monetary policy tightening to control inflation.

EBRD said downside risks remain, such as high inflation, slower growth in Europe, rising regional geopolitical tensions and tighter global financing conditions due to highTurkey’s short-term external financing needs.

In March, Turkey secured the backing from EBRD to launch a new initiative to decarbonise its hard-to-abate sectors, such as steel, cement, aluminium and fertiliser.

EBRD is a key investor in Turkey, with almost €20 billion ($22 billion) invested in 442 projects and trade facilitation lines since 2009, predominantly in the private sector.  

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