Türkiye | The economy grew by 3.2% in 2024 as expected

Summary

The Turkish economy grew by 1.7% q/q in 4Q24, close to our expectations, leading to 3.2% y/y growth in 2024. Our monthly GDP nowcast shows a continuation of the recovery trend in 1Q25 with a 1-1.5% q/q growth as flash indicators signal as of February.

Key points

• Key points:
• On production, industry contributed positively (0.3pp) to annual growth in 4Q24, after two consecutive quarters of contraction. Agriculture (0.2pp), services (0.9pp), and construction (0.4pp) continued to make positive contributions with also a strong support from taxes (1.2pp).
• The contribution of net exports to GDP growth turned negative in 4Q24, while domestic demand surged driven by consumption (up 4.3% q/q, s.a.) and investment (up 3.9% q/q, s.a.).
• The imbalance between demand and supply remained with a slower pace of depletion from inventories. Output gap became less negative, posing an upward risk to the disinflation path.
• The leading activity indicators show only a limited loss of momentum for 1Q25, with some indicators in industry such as manufacturing capacity utilization and PMI demonstrate worsening conditions, whereas confidence indicators in other sectors still indicate a recovery. The demand side indicators reflect a further pick-up in the presence of ongoing ease in financial conditions and acceleration in credit growth beyond caps, particularly credit card expenditures.
• Although the heightening protectionism triggered by trade tariffs could pose downside risk on global growth, current strong momentum, likelihood of lower real policy rate than we previously expected and delayed fiscal consolidation exert upside risks on GDP growth, which we will likely upgrade above 3%.

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