Sebastien Turban, Türkiye economist at the Organisation for Economic Co-operation and Development (OECD), stated that if Türkiye maintains its current economic policies, it could further boost improving international investor confidence and return to sustainable growth levels by 2026. Turban, one of the authors of the OECD’s recently published “Türkiye Country Review Report,” shared key findings and his outlook on Türkiye’s economy.
Macroeconomic Policy Shift Leads to Progress
Turban emphasized that since mid-2023, Türkiye has undergone a significant transformation in its macroeconomic policies. As a result, the current account deficit has narrowed, and both inflation and inflation expectations have started to decline gradually.
Despite inflation remaining high, he noted that the downward trend continues. “Fiscal and monetary policy implementations are aligned with our projections,” said Turban. “The tight stance in fiscal and monetary policy should continue until inflation is fully under control. If the government meets the Medium-Term Program targets and maintains the current level of fiscal discipline over the long term, public debt will remain sustainable.”
Commitment from Central Bank and Authorities
He highlighted that the Central Bank of the Republic of Türkiye (CBRT) and fiscal authorities have shown strong commitments to maintaining this policy stance. “The CBRT has clearly communicated that monetary policy will remain tight until inflation is under control, and interest rate decisions will be based on inflation and expectations,” Turban said.
While acknowledging a potential risk of premature monetary easing, he stressed that this is not part of their base scenario, which assumes the continued commitment to tight macroeconomic policies.
Improved External Position and Growing Reserves
Turban added that this policy shift has also improved Türkiye’s external position, with gross reserves rising significantly over the past two years. Notably, net reserves excluding swaps turned positive in 2024 for the first time since early 2020. Although there has been some recent decline, it is not substantial compared to the gains made over the past two years, which Turban views as a positive development.
Türkiye’s Potential Growth Estimated at 4%
Turban explained that before these macroeconomic adjustments, Türkiye’s economic growth was at unsustainably high levels. Tighter fiscal and monetary policies have helped make growth more sustainable.
OECD expects Türkiye’s economy to grow by 3.1% in 2025, with tight policies creating short-term pressure on both inflation and growth. However, Turban stated:
“This slowdown in growth is primarily driven by macroeconomic policies aimed at bringing inflation back to a sustainable path. As the economy stabilizes, we forecast that growth will return to 3.9% in 2026, which aligns with Türkiye’s estimated potential growth rate of 4%. At this level, the economy can grow without triggering inflationary pressures.”
Investor Confidence Rising, But More Needed
Regarding international investor perception, Turban noted a noticeable improvement in sentiment thanks to Türkiye’s recent macroeconomic adjustments. One of the key indicators is the credit rating upgrades by global agencies.
“There’s greater optimism among international investors, but more progress is needed. It is crucial that foreign capital inflows into Türkiye are direct investments, rather than volatile portfolio flows,” he said.
Turban emphasized the need for policy continuity to build investor trust: “We see a strong policy commitment from the CBRT and economic authorities, even amid recent uncertainties. Maintaining this stance could enhance investor confidence and lead to more sustainable and long-term foreign investment inflows.”
Highlights from OECD’s Türkiye Country Review
In its latest country review, the OECD recommended maintaining tight fiscal and monetary policy, strengthening fiscal discipline, increasing spending efficiency, broadening tax revenues, and implementing structural reforms to support inclusive growth.
The report stated that Türkiye’s economic convergence depends heavily on its ability to implement structural reforms. According to OECD projections, Türkiye’s economy will grow by 3.1% in 2025 and 3.9% in 2026, with inflation expected to decline to 31.4% by end-2025 and 17.3% by 2026.
OECD data also shows that Türkiye was one of the fastest-growing economies among OECD countries over the past decade, averaging 4.9% annual growth.
Source: Patronlar Dünyası/ Prepared by: İlayda Gök