Türkiye | Strong buffer from 1Q25 GDP growth

Summary

High frequency data for 1Q25 point that the q/q growth will likely remain steady as in 4Q24, supported by the domestic demand. Despite the uncertainty on trade wars and recent tightening in financial conditions, we evaluate risks as balanced on our 2025 GDP growth forecast of 3.5%, given the strong buffer of 1Q25 growth.

Key points

• Key points:
• Sectoral details reveal that construction and services sectors might have supported economic activity in 1Q25, while industrial production remained relatively weaker.
• Our common factor calculation on soft indicators displays a slight improvement in March, whereas the expectations for the next 3 months in terms of orders, particularly in services and retail, deteriorated pointing to more challenging conditions in 2Q25.
• Our quarter on quarter demand nowcast indicators signal some moderation in private consumption and investment, while the contribution to GDP from net exports might have turned into positive in 1Q25. The imbalance between demand and supply continued, signaling that the output gap might have switched to positive territory in 1Q25, which we expect to reverse again, led by the recent tightening in financial conditions and increased uncertainty.
• Our monthly GDP indicator nowcasts a slow-down to 0.9% q/q as of April with limited information after showing 1.8% q/q growth for 1Q25 with the inclusion of February hard data.
• The strong momentum in 1Q25 and expansionary fiscal stance support the near term growth outlook, while uncertainties about trade tariffs and recent tightening in financial conditions could be downside risks. Therefore, we eliminate our previous upward bias on our 2025 GDP growth forecast and maintain 3.5% for the time being. If global uncertainties persist and weigh to the downside on global growth, we attain a downward bias on our 2026 GDP growth forecast of 4%.

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