OECD lifts growth forecast for Turkish economy to 3.4 percent

ISTANBUL

The Organizations for Economic Cooperation and Development (OECD) has lifted its GDP growth forecast for the Turkish economy for 2024 from a previous 2.9 percent to 3.4 percent.

Investment activity is expected to remain strong partly due to the ongoing reconstruction following the 2023 earthquake, the Paris-based organization said in in its latest quarterly report, released on May 2.

Exports will gradually strengthen reflecting an improved external environment, it added.

Despite tighter financial conditions, short-term indicators indicate still solid domestic demand growth at the beginning of 2024, the report noted.

“Consumer goods production and retail sales increased at the beginning of the year and activity in the construction sector remained dynamic due to rebuilding and repair in the 2023 earthquake zone,” it said.

Economic growth will ease to 3.4 percent in 2024 and 3.2 percent in 2025 as tighter monetary and fiscal policies weigh on consumption, according to the report.

“Higher costs arising from further disruptions to transportation and trade could have sizable negative effects on the economy. In contrast, growth could be boosted further by a stronger influx of foreign investment due to credible improvements in fiscal, financial and monetary policy,” it stressed.

If inflation remains high, further monetary and fiscal tightening may be necessary, the report said.

The OECD predicts that Türkiye’s annual inflation will decline from a projected 57.5 percent this year to 28.7 percent in 2025.

The organization also raised its forecast for global growth in 2024.

The OEDC said it now sees this year's global growth at 3.1 percent, up from its previous projection of 2.9 percent in February.

The U.S. economy is now expected to expand 2.6 percent in 2024, up from the 2.1 percent previously expected, and faster than last year's 2.5 percent.

Chinese growth remains even stronger, with the OECD raising its projection to 4.9 percent in 2024 compared to the 4.7 percent previously expected thanks notably to an expansionary budgetary policy.

 Manufacturing activity slows

Meanwhile, the latest PMI data pointed to a challenging month for Turkish manufacturers at the start of the second quarter of 2024, a survey by S&P Global has shown.

The headline PMI moved below the 50 no-change mark in April, posting 49.3 from 50 in March.

A sustained slowdown in new orders was recorded, feeding through to a renewed moderation of output, the survey said.

Production eased for the first time in three months amid softening demand conditions, according to the report.

Demand was impacted by rising prices and high interest rates, with new orders softening for the tenth month running, it added.