Turkey's economy grows faster than expected

Turkey's economy grew 3% in the fourth quarter of 2024 at an annual rate and 3.2% for the whole of last year, exceeding estimates despite high interest rates in the country, according to data announced on Friday by the National Institute of Statistics in Ankara, cited by Reuters.

The government, which had initially anticipated growth of 3.5% in 2024, revised its forecast downwards, amid the adjustment of domestic demand and efforts to slow inflation, which exceeded 75% in May and is now slightly above 40%.

"Last year, we recorded a balanced economic growth, with a contribution of 2.1 points from domestic demand and 1.1 points from net external demand," said Turkish Finance Minister Mehmet Simsek, adding: "More favorable financial conditions, lower inflation, increased predictability of our policies and improved confidence have a positive effect on economic activity. Good economic developments in Turkey's trading partners, more encouraging global financial conditions and moderate expectations for commodity prices will boost economic growth in 2025, but increasing protectionist policies in global trade and geopolitical developments are among the risk factors." Analysts surveyed by Reuters had expected Turkey's GDP to grow 2.6 percent in the fourth quarter of 2024 and 3 percent in the full year. They expect Turkey's economy to expand by 3.1% in 2025, significantly lower than the 5.1% in 2023, reflecting the effect of the interest rate hike.

The Bank of Turkey has cut its key policy rate to 45% in the last two meetings and is expected to continue the trend, reaching 30% by the end of the year.