Future expectations of the Turkish Economy

Turkey's economy is navigating a delicate balance, with the government closely monitoring efforts to combat rising interest rates and inflation. Alongside monetary policy adjustments, there's a significant focus on trimming public expenditures while providing more incentives to boost productivity. Projections from the IMF suggest a notable decrease in inflation by year-end, with expectations of complete control by 2025.

Foreign Direct Investment in Turkey

With a national income of $1.34 trillion, Turkey stands as the 17th largest economy globally and is poised to attract fresh investments. Having drawn $13 billion in foreign direct investment in 2023, the nation aims for an additional $15 billion this year, with a target of $70 billion in investments between 2024 and 2028. As Turkey seeks to increase its global investment share from 1% to 1.5% by 2028, preparations for structural economic reforms are underway.

Tackling inflation in Turkey

The topic of inflation in Turkey has become a prominent concern among foreign investors, particularly in the wake of the global crisis triggered by the pandemic. In response, Turkey implemented a new economic management strategy aimed at combating inflationary pressures.

A key tactic employed was the increase in interest rates to bolster the value of Turkish lira assets. This move incentivised Turkish citizens to turn towards investments denominated in Turkish lira. Consequently, between June 2023 and May 2024, Turkey saw an influx of $15 billion in investments and funds.

The proactive measures taken by Turkey have not gone unnoticed by international organisations, which have started to raise Turkey's credit rating. This uptrend is expected to persist, with Turkey poised to further support its economic stabilisation efforts through structural reforms.

This concerted approach underscores Turkey's commitment to addressing inflationary challenges head-on while simultaneously attracting foreign investment and bolstering investor confidence in its economy.

Turkey’s economic trajectory

Turkey has achieved a significant milestone in its economic trajectory, attaining high-income status as acknowledged by both the World Bank and the IMF, with a per capita income reaching $15,000 in 2024. Forecasts suggest that Turkey is poised to edge closer to the $20,000 mark by 2028.

This remarkable ascent is further underscored by Turkey's ascent in global rankings, currently positioned as the 11th largest economy worldwide in terms of purchasing power parity. Projections indicate that by 2028, Turkey will ascend to the 9th position, solidifying its standing as the second-largest economy in Europe, trailing only behind Germany.

Economic momentum over next four years

The evolving investment landscape in Turkey is poised to become increasingly attractive, particularly as efforts to address current inflationary challenges yield positive results. With an eye towards the future, Turkey anticipates a sustained influx of foreign direct investment, building upon its already impressive track record of attracting $265 billion in total foreign direct investment.

Moreover, Turkey's allure is further amplified by the presence of 88 thousand foreign companies operating within its borders, a testament to its vibrant and dynamic business environment. With a clear path forward and a prolonged period free from electoral cycles for the next 4.5 years, Turkey is well-positioned to capitalise on its economic momentum and emerge as a beacon of stability and prosperity in the region.

Turkey in the current year

The economic trajectory for the current year is anticipated to follow a pattern of nuanced adjustments, with several key factors contributing to its progression. Initially, the downward trend in inflation is expected to persist as a result of the measures implemented to curb rising interest rates, thereby dampening demand. This reduction in inflationary pressures, in turn, facilitates a corresponding decline in interest rates, fostering an environment conducive to accelerated economic activities.

Central to the government's strategy is a steadfast commitment to preserving employment levels, which stood at 32.22 million as of February 2024. This commitment underscores the government's recognition of the pivotal role employment plays in sustaining economic stability and fostering social cohesion.

Additionally, the government has set ambitious export targets, aiming to achieve $270 billion in exports for the year. Encouragingly, recent trends indicate a decrease in imports over the past 10 months, coupled with a steady increase in exports. This bodes well for narrowing the current account deficit, surpassing initial expectations and contributing to the overall stabilisation of the Turkish economy.

Resilience and adaptability

In sum, the Turkish economy is poised to navigate the current economic landscape with resilience and adaptability. Through a judicious interplay of monetary policies, employment preservation efforts, and export-driven initiatives, Turkey is well-positioned to sustain its economic momentum and chart a course towards continued stability and growth.