DEVELOPMENTS IN THE GLOBAL AND TURKISH ECONOMIES IN 2025 AND EXPECTATIONS FOR 2026

GLOBAL ECONOMY: GROWTH, TRADE, AND INVESTMENT Fragilities in the global economy, which began with the pandemic in 2020 and subsequently increased due to factors such as hot wars and geopolitical risks, as well as risks such as restructuring of supply chains, trade wars, and rising protectionist tendencies, have continued to some extent in 2025. This year’s story has been dominated by the new tariffs announced by the US in April. On the one hand, political uncertainty surrounding global trade increased, while on the other hand, the cost of doing business rose. During this painful process, forecasts for global growth were first revised downward, then revised upward again as agreements were partially reached and uncertainty decreased.

At this point, global growth, which was 3.3 percent in 2024, is expected to decline to 3.2 percent in 2025 and 3.1 per cent in 2026. Developed countries, primarily the European Union, are expected to contribute less to this growth, while developing and less developed countries are expected to contribute more. The persistence of global uncertainties beyond initial projections, rising protectionist tendencies, and labor shocks linked to the development of artificial intelligence are emerging as key risk factors for growth.

Global merchandise trade was expected to grow by 3 percent at the beginning of 2025. However, with the tariff wars peaking in April, these expectations declined, and merchandise trade growth is now projected to be 2.4 percent in 2025 and 0.5 percent in 2026. In contrast, following a 6.8 percent growth in 2024, exports in the services sector, which gained greater importance in global trade after the pandemic, are expected to increase by 4.6 percent in 2025 and 4.4 percent in 2026.

Global investments, which have declined for two con secutive years, are also expected to decrease by 3% in 2025. Geopolitical tensions, regional conflicts, economic fragmentation, emerging industrial policies, and multina tional efforts to reduce risks in supply chains are likely to continue to negatively affect direct foreign investment flows.

THE TURKISH ECONOMY

The program aimed at achieving disinflation continued to be implemented in 2025. In line with the decline in inflation, the CBRT interest rate, which was 46% at the beginning of the year, was first reduced to 43.5% and then to 41%. However, due to f luctuations in financial markets in March, it was temporarily replaced by an interest rate hike and raised to 44.5% in April. Subsequently, interest rates were reduced further to 38% in line with the normalization of markets and the decline in inflation. Inflation, which stood at 44.38% at the end of 2024, gradually declined to 35% in May. However, although inflation continued to decline after the summer months, the slowdown in its pace slowed down the disinflation process. Thus, the annual CPI increase, which we expected to fall below 30% at the end of the year, is expected to close the year at 30-31%. Rigidi ties in the prices of services such as education, health, and housing, as well as frost events causing price increases in agricultural food products, have played a significant role in slowing down the disinflation pro cess. The disinflation program is expected to form the backbone of economic policies in 2026. Although inflation has shown resistance to falling below 30% this year, this resistance is expected to break in 2026, with inflation falling to around 20%. In addition to the tight monetary policy implemented by the CBRT in the fight against inflation, it will be important to take steps to break price rigidity, especially in the service sectors, and turn expectations positive, as well as to implement a tight fiscal policy in line with the reduction in earthquake-related expenditures.

The costs of the ongoing disinflation policy on the real sector also continue. The PMI data, which fell below 50 in April 2024, has remained below 50 since then and stood at 46.7 as of September 2025. The decline is particularly pronounced in labor-intensive sectors, and production losses have begun to lead to job losses in these sectors.

Economic growth, which stood at 3.3% in 2024, declined to 2.3% in the first quarter of 2025, then increased by and 3.7 percent in the third quarter, showing a partial recovery trend. Thus, the growth rate for the first three quarters of the year was 3.7%. Look ing at the sectors, industrial production contracted in the first quarter but increased by 6.1% in the sec ond quarter. The construction sector made the most significant contribution to growth in the first half of the year, driven by earthquake-related spending and incentives for urban transformation. On the demand side, household consumption expenditures remained strong, while investments increased moderately by 1.8% in the first quarter and then contributed more strongly with an 8% increase in the second quarter. Exports remained positive and continued to contribute moderately. According to the Medium-Term Program updated in September, growth is projected to be 3.3% in 2025 and 3.8% in 2026.

Fluctuations in global trade and the impact of the dis inflation program implemented in our country on our exports continued in 2025. As of October 2025, our 12-month exports increased by 3.1 percent annually, reaching $270 billion. Imports increased by 6.1 per cent annually during the same period, reaching $360 billion. Both figures are consistent with the targets set out in the Medium-Term Program. However, the share of high-tech product exports remains insufficient, and priority should be given to programs aimed at increas ing this share. On the import side, consumer goods imports exceeded investment goods imports in 2025, which is hampering domestic production. Although restrictions have been imposed on consumer goods imported via e-commerce, it is considered that further steps need to be taken in this area.

Finally, the amount of foreign direct investment coming to Türkiye in 2025 has exceeded $15 billion on an annualized basis as of September, which is the highest amount recorded since 2015. Declining inflation and country risk premiums, new incentives for high-tech investment, and regulations improving the investment environment have played a key role in attracting this in vestment, fostering increased confidence and stability.