Economic Growth in Türkiye and Beyond
The World Bank has released its latest regional report, covering Europe and Central Asia (ECA), which includes an update on the economic growth of various countries, including Türkiye. According to the report, economic growth in Türkiye is expected to firm up this year, with a forecasted growth rate of 3.5%. This is a 0.4 percentage point upgrade compared to the previous report.
Current Economic Prospects
The Turkish economy is expected to experience stronger expansion next year and in 2027, with growth rates of 3.7% and 4.4%, respectively. The World Bank attributes this growth to resilient services, investment, and robust consumer demand. The report also evaluates key economic prospects, including growth, fiscal policies, inflation, jobs, and car sales and new registrations across countries.
Regional Comparison
In comparison to other countries in the region, the growth in the Western Balkans is expected to ease this year to 3% from 3.5% in 2024, due to political uncertainty in some countries. Additionally, the growth in Ukraine is projected to weaken, with an expected slowdown to 2% in 2025 from 2.9% in 2024, as a result of Russia’s prolonged invasion affecting investment and business activity.
Drivers of Growth in Türkiye
The expansion in Türkiye is turning out to be more "broad-based" and is expected to rebound due to looser monetary policy and lower inflation. The World Bank suggests that growth is set to strengthen to 3.7% next year and 4.4% in 2027, as monetary policy loosens and inflation continues to moderate. With investment recovering alongside resilient consumption, the expansion in Türkiye is becoming more broad-based, signaling a shift toward a more durable and sustainable trajectory.
Shift towards Cleaner Vehicles
The region is also rapidly shifting towards cleaner vehicles, with a significant increase in new registrations of hybrids and plug-in hybrids. In Romania, for example, new registrations of hybrids and plug-in hybrids rose substantially despite a steep drop in overall registrations. In Türkiye, hybrid and electric vehicles now account for nearly 45% of all registrations, up from about 22% a year ago.
Monetary Policy and Inflation
The World Bank expects the central bank to maintain a restrictive policy stance to anchor inflation expectations. As inflation continues to moderate, the economy is expected to experience a more sustainable growth trajectory.
Conclusion
In conclusion, the World Bank’s latest report suggests that economic growth in Türkiye is expected to firm up this year and experience stronger expansion in the coming years. The growth is driven by resilient services, investment, and robust consumer demand, and is expected to become more broad-based. The region is also shifting towards cleaner vehicles, with a significant increase in new registrations of hybrids and plug-in hybrids. Overall, the report presents a positive outlook for the Turkish economy and the region as a whole.
