EBRD lifts Turkey’s 2025 growth outlook but warns of risks: report

The European Bank for Reconstruction and Development (EBRD) has raised its growth forecast for Turkey in 2025 while cautioning that political tensions and unstable financial conditions remain major threats, Reuters reported.

In its latest regional report, the bank revised its projection for Turkey’s economy upward to 3.1 percent for 2025, a 0.3-point increase from its May estimate. The 2026 outlook was left unchanged at 3.5 percent. Growth is expected to stay in the 3.1–3.5 percent range over the two years, supported by looser financial conditions.

The report warned, however, that Turkey’s heavy short-term external financing needs leave it vulnerable to global market volatility, tighter funding conditions and political uncertainty.

The arrest of İstanbul Mayor Ekrem İmamoğlu, regarded as President Recep Tayyip Erdoğan’s most prominent opponent, in March rattled investors, sending the lira sharply lower and prompting the central bank to deliver a surprise rate hike in April. That move interrupted an easing cycle launched earlier in the year.

EBRD Chief Economist Beata Javorcik said the central bank’s decision showed a commitment to curbing inflation despite the economic toll of high borrowing costs. “The authorities appear determined to tackle inflation, recognizing that the cost of inaction would be even greater,” she said.

Javorcik noted that the government has tightened controls on private lending while allowing the lira to appreciate in real terms, a strategy that helps reduce import inflation but weakens export competitiveness.

The EBRD added that easing regional tensions, particularly in Syria and the Caucasus, along with stronger ties with the European Union, could allow Turkey to build on its strengths in construction, logistics and defense.

Turkey was the development bank’s single largest investment destination in 2024, according to the report.