If Türkiye maintains its current monetary policies and boosts foreign investor confidence, it is expected to return to sustainable growth levels by 2026, an economist at the Paris-based Organisation for Economic Cooperation and Development (OECD) told Anadolu.
Sebastien Turban, one of the authors of the OECD’s Türkiye economic survey, which was released April 10, said the country’s current account deficit has narrowed, and inflation along with expectations has declined since the shift in macroeconomic policy in mid-2023.
Turban said inflation remains high but is moving downward, and both fiscal and monetary tightening must continue until inflation is under control.
“If the government achieves its medium-term program objectives and maintains this level of deficit in the long run, public debt and finances will be sustainable,” he said.
He added that Türkiye’s Central Bank and fiscal institutions have committed to preserving the current stance.
“Looking at Central Bank communication, they are really clear that the monetary policy stance should remain tight until inflation is under control, and decisions on interest rates will be determined by the trajectory of inflation and expectations.
“We see a risk of premature relaxation, but it is a risk. The baseline for us is that we observe there is a strong commitment to those policies, and we see premature relaxation as a risk out of the baseline,” he noted.
Turban said macroeconomic reforms in the past two years have strengthened Türkiye’s external position and gross reserves. He noted that net reserves excluding swaps turned positive last year for the first time since early 2020.
“However, the reduction so far has been observable but still significantly lower than the buildup that has occurred in the past two years,” he said. “We still see the increase in reserves as a really positive thing, and it has been critical.”
Before mid-2023, he said Türkiye’s growth was “unsustainably high,” but tighter policies have made it more stable.
Turban said the OECD expects Türkiye’s economy to grow 3.1 percent this year, in part due to continued monetary and fiscal tightening.
“This will create downward pressure on inflation but also on growth,” he added.
“The potential growth of the Turkish economy right now for the OECD is assessed at around 4%. Potential growth is how much the economy can grow without putting too much inflationary pressure,” he noted. “Our current projections show that in 2026, growth of Türkiye will go back to this potential level—at this level, there’s no upward pressure to inflation.”
He said foreign direct investment and investor perception have improved due to macroeconomic measures. Credit rating upgrades have also contributed to growing international optimism.
“It is important to make sure that those investments are not volatile capital flows but more foreign direct investment that is more stable in the economy,” he said. “This is part of the reason why we advocate for the policy stance to be maintained. Investor confidence can be built up.”
“Right now, what we have seen with communications from the Central Bank and fiscal authorities and from the decisions that have been taken as a response to the current uncertainties, the commitment is there, and the confidence in Türkiye is building up.
“We think it is important to continue like this to make sure that confidence keeps improving and those foreign investment flows become more permanent,” he added.