European Bank for Reconstruction and Development updates Turkey's growth forecast

The European Bank for Reconstruction and Development (EBRD) has projected that the Turkish economy will grow by 2.7 percent this year and 3 percent in 2025, citing expectations that monetary and fiscal policy tightening will continue as part of the fight against inflation.

The EBRD published its Regional Economic Prospects report, which covers the economies in which it operates.

Accordingly, the EBRD revised its regional economic growth forecast from last September downward by 0.2 percent to 3 percent. Growth in EBRD economies was 2.5 percent last year.

The bank also revised its growth forecast for the Turkish economy downward from the 3 percent level in September to 2.7 percent. The decline in growth expectations was driven by the anticipation that monetary and fiscal policy tightening will continue as part of the fight against inflation.

3 PERCENT GROWTH EXPECTATION FOR 2025

The bank projected that the Turkish economy will grow by 3 percent in 2025.

According to the report, while Turkey's economic policy tightened with tax increases and stronger macroprudential policy measures, economic growth last year was driven by the services sector, aided by post-earthquake reconstruction efforts.

The return to more orthodox policies since June 2023 has increased confidence among domestic and international investors, and Turkey recently received its first sovereign credit rating upgrade from a major rating agency in over 10 years.

On the other hand, risks persist in light of high inflation, slower growth in Europe, increased geopolitical tensions in the region, and tighter global financing conditions due to high short-term external financing needs.

Of the 19.8 billion Euros invested by the EBRD in 442 projects and trade finance initiatives in Turkey since 2009, 93 percent has been provided to the private sector.