Turkish economy saw major policy shifts in 2024

ANKARA- Anadolu Agency

Türkiye’s economy in 2024 experienced one of its most transformative years in recent memory, marked by critical policy adjustments aimed at tackling inflation and stabilizing markets.

The year began with the continuation of strict monetary policies but ended with a significant shift in strategy. The focus of the economic management in 2024 was taming inflation.

Following the resignation of Governor Hafize Gaye Erkan in February, Fatih Karahan took over as head of the Central Bank as the bank maintained an aggressive tightening policy, raising interest rates to a peak of 50 percent by mid-year.

This policy succeeded in reducing inflation to a 17-month low of 47.09 percent by November.

But the most notable development came in late December, when the Central Bank shifted course by cutting its key interest rate for the first time in nearly two years, trimming the policy rate from 50 percent to 47.5 percent.

The bank emphasized that it remained committed to maintaining price stability and would monitor inflation closely before making further adjustments.

The international community took note. Global credit rating agencies, Moody’s, Fitch and S&P Global, upgraded Türkiye's rating significantly throughout 2024.

This reflected a growing confidence in Türkiye’s economic management and its commitment to addressing structural challenges.

In addition to these rating upgrades, Türkiye saw a significant improvement in its international reserves which hit a record level of $159.4 billion as of Dec. 6.

Türkiye's five-year credit default swaps (CDS) dipped below 250 basis points on Dec. 6 for the first time since February 2020, leading to easier access to financing with decreased cost.

The performance of Türkiye's benchmark BIST 100 stock index also reflected renewed investor sentiment. Throughout 2024, the index saw a robust recovery, rising nearly 34 percent by year-end, led by gains in the banking and industrial sectors.

Despite these positive developments, the country faced challenges. The unemployment rate rose to 8.8 percent in October, reflecting the economic adjustments and the impact of high interest rates on job creation.

GDP growth in Türkiye slowed in 2024. The economy grew by 5.5 percent year-on-year in the first quarter, 2.4 percent in the second quarter and 2.1 percent in the third quarter.

The Turkish economy contracted by 0.2 percent quarter-on-quarter in both the second and third quarters of 2024, reversing 1.2 percent growth in the first quarter.