Turkey’s GDP growth rate for the year ending December 2025 came in at 3.70%, according to the Sigmanomics database. This figure is a slowdown from the 4.90% recorded in September and below the market estimate of 4.20%. The deceleration signals a cooling phase after a robust recovery earlier in the year. Over the past 12 months, the average GDP growth stood near 3.60%, indicating that the latest print aligns closely with the annual trend but marks a clear deceleration from mid-year peaks.

Drivers this month

• Domestic consumption growth slowed, contributing -0.40 percentage points (pp) to GDP growth.
• Export volumes remained resilient, adding 0.80 pp amid steady external demand.
• Investment activity contracted slightly, subtracting -0.30 pp due to tighter credit conditions.

Policy pulse

The Central Bank of the Republic of Turkey (CBRT) maintained a restrictive monetary stance, with the policy rate steady at 22%. Inflation remains elevated at 38.50% YoY, well above the 5% target, pressuring real incomes and consumption. The GDP print reflects the lagged impact of monetary tightening aimed at curbing inflationary pressures.

Market lens

Following the GDP release, the Turkish lira (TRY) depreciated by 0.60% against the USD within the first hour. The 2-year government bond yield rose by 15 basis points, reflecting increased risk premiums amid growth concerns. Breakeven inflation rates edged higher, signaling persistent inflation expectations.

Core macroeconomic indicators provide context for the GDP slowdown. Inflation remains a critical challenge, with consumer prices rising 38.50% YoY in November 2025, down slightly from 40.10% six months earlier. Unemployment held steady at 11.20%, while the current account deficit narrowed to 1.80% of GDP, supported by export growth and subdued imports.

Monetary Policy & Financial Conditions

The CBRT’s tight monetary policy, with a 22% policy rate, aims to anchor inflation expectations. Credit growth slowed to 7% YoY from 12% earlier in the year, reflecting tighter lending standards. The TRY’s volatility remains elevated, influenced by geopolitical tensions and global risk sentiment.

Fiscal Policy & Government Budget

Fiscal discipline tightened in 2025, with the government targeting a primary surplus of 1.50% of GDP. Public debt stabilized at 38% of GDP, down from 40% in 2024. Increased tax revenues and controlled spending have helped reduce the budget deficit to 3.20% of GDP, supporting macroeconomic stability.

External Shocks & Geopolitical Risks

Turkey faces ongoing geopolitical risks from regional conflicts and strained relations with key trade partners. Energy price volatility and supply chain disruptions continue to pressure inflation and production costs. These external shocks weigh on investor confidence and economic growth prospects.

Market lens

Immediate reaction: The TRY weakened by 0.60% against the USD, while 2-year yields rose 15 basis points, indicating increased risk aversion. Inflation breakevens ticked up, reflecting persistent price pressures despite slower growth.

Looking ahead, Turkey’s growth trajectory faces multiple scenarios shaped by domestic and external factors. The baseline forecast projects GDP growth stabilizing near 3.50% in 2026, supported by moderate inflation easing and steady export demand.

Bullish scenario (20% probability)

• Inflation falls faster than expected, below 20% by mid-2026.
• Monetary policy eases gradually, boosting credit and consumption.
• Geopolitical tensions ease, improving investor confidence and capital inflows.
• GDP growth rebounds to 4.50%+ by year-end 2026.

Base scenario (55% probability)

• Inflation declines slowly, remaining above 25% through 2026.
• Monetary policy remains restrictive to anchor inflation.
• External demand remains stable but volatile.
• GDP growth hovers around 3.00–3.70% in 2026.

Bearish scenario (25% probability)

• Inflation remains sticky above 30%, eroding real incomes.
• Geopolitical shocks intensify, disrupting trade and investment.
• Monetary tightening continues, further dampening credit growth.
• GDP growth falls below 2.50%, risking recessionary pressures.

Structural & Long-Run Trends

Turkey’s long-term growth depends on structural reforms to improve productivity, diversify exports, and stabilize inflation. Demographic shifts and urbanization support potential growth near 4%, but persistent inflation and political risks remain key constraints.

Turkey’s December 2025 GDP YoY reading of 3.70% signals a moderation from earlier robust growth. The slowdown reflects the combined impact of tight monetary policy, elevated inflation, and external uncertainties. While the economy remains resilient, risks from geopolitical tensions and inflation persistence warrant caution. Policymakers face a delicate balance between supporting growth and taming inflation. Financial markets have priced in some of these risks, but volatility is likely to persist. Structural reforms and external demand recovery will be critical to sustaining growth momentum in 2026.

Key Markets Likely to React to Gross Domestic Product YoY

Turkey’s GDP growth data typically influences currency, bond, and equity markets sensitive to macroeconomic shifts. The following tradable symbols have shown historical correlation with Turkey’s economic performance, making them key instruments for investors tracking GDP developments.

• ASELS – A major Turkish defense stock, sensitive to domestic economic conditions and government spending.
• USDTRY – The USD/TRY currency pair reacts strongly to GDP and inflation data, reflecting macroeconomic sentiment.
• EURTRY – Euro to Turkish lira exchange rate, influenced by trade flows and geopolitical risks.
• BTCUSD – Bitcoin’s price often moves inversely to emerging market risk sentiment, including Turkey’s macro shocks.
• THYAO – Turkish Airlines stock, sensitive to economic growth and tourism trends.

Frequently Asked Questions

What does Turkey’s latest GDP YoY figure indicate?

The 3.70% GDP YoY growth indicates a slowdown from previous quarters, reflecting tighter monetary policy and external headwinds affecting economic momentum.

How does the GDP print affect Turkey’s monetary policy?

The slower growth supports the CBRT’s cautious stance, maintaining high interest rates to combat inflation while balancing growth risks.

Why is the GDP YoY important for investors?

GDP YoY growth signals economic health, influencing currency, bond yields, and equity markets, guiding investment decisions in Turkey.

Key takeaway: Turkey’s GDP growth deceleration to 3.70% underscores the challenges of balancing inflation control with growth support amid geopolitical and external risks.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.

Updated 12/1/25