Türkiye | Recovery signals in 4Q24

Summary

Incoming hard data points to a faster recovery in 4Q24 than our previous stagnant growth expectation on quarterly basis. We expect the GDP growth to reach around 3% in 2024 but acknowledge some upside risks recently emerge on our 2025 growth forecast of 2.5%.

Key points

• Key points:
• Sectoral details reveal improvement across all sectors, despite being not broad-based. Industrial production, excluding volatile sectors, showed much more limited recovery; while the services sector’s output increase was relatively moderate in October-November, compared to 3Q24.
• Leading indicators point to the ongoing recovery in activity but we observe that confidence indices generally reflect more optimistic expectations compared to hard data.
• The domestic demand excluding stocks could have recovered in 4Q24 in the presence of slight easing in tight financial conditions with increasing consumer loans and real card consumption.
• Demand conditions remained stronger than supply in 2024; while output gap, after turning into negative as of 3Q24, did not deepen further in 4Q24. Therefore, the slow deceleration in aggregate demand results in a weaker-than-expected support to fight against inflation.
• The current faster than expected recovery, the likelihood of fiscal policy to remain expansionary in the upcoming months and lower than expected real interest rates could pose limited upside risks to our 2025 GDP growth forecast of 2.5% but downside risks to global growth stemming from the potential trade wars and the higher than expected terminal rate in the US will be the determining factors in the overall impact.

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