Introduction to Turkish Economy
The Turkish economy has been a topic of interest for many investors and financial institutions. Recently, Morgan Stanley, a US-based investment bank, has made some predictions about the future of the Turkish economy.
Expected Rate Cut
Morgan Stanley expects the Central Bank of the Republic of Türkiye (CBRT) to reduce its policy rate by 100 basis points in December 2025, bringing it down to 38.5%. This prediction is based on the bank’s analysis of the current economic situation in Turkey. The central bank is also expected to continue its easing cycle through 2026, lowering the policy rate to 27% by the end of that year and to 21% in 2027.
Inflation Projections
The report by Morgan Stanley also projected Türkiye’s year-end inflation at 21% for 2026 and 17% for 2027, exceeding both the Turkish government’s Medium-Term Program and the CBRT’s latest inflation report. The bank attributed the slower disinflation in 2027 to an expected pickup in economic growth, though it saw the overall trend of declining inflation to continue. Official data showed that Türkiye’s headline inflation fell to 32.87% in October, after briefly rising in September and interrupting a 15-month downtrend.
Emerging Market Trends
In a separate note, France-based bank Societe Generale strategists predicted that the performance of emerging market currencies may deteriorate in 2026 due to a strengthening US dollar, bracing for average spot returns of just 0.3% and total returns around 3% across emerging market currencies. However, currencies of Nigeria, Türkiye, and Brazil are expected to outperform their peers, according to the note.
Outperforming Currencies
Societe Generale views many emerging market currencies as currently overvalued, with some Central and Eastern European currencies considered 15–20% above fair value, and the Colombian and Mexican pesos overvalued by 10–15%. The report added that local bond yields in emerging markets are likely to remain positive in 2026, with better performance expected in Türkiye and Brazil.
Conclusion
In conclusion, Morgan Stanley’s predictions about the Turkish economy are significant, and the expected rate cut and inflation projections will likely have a major impact on the country’s economic future. The performance of emerging market currencies, including the Turkish lira, will also be closely watched in the coming year. As the global economy continues to evolve, it will be important to monitor these trends and predictions to understand their potential effects on the Turkish economy and beyond.
