World Bank warns of slower growth

The annual Macroeconomic Monitoring Report, financed by the European Union, estimates that growth eased from 8.5 per cent in 2024 to 4.8 per cent in 2025, with a further slowdown expected in 2026.

Inflation remains a major challenge, averaging 40 per cent in 2025 and standing at 37.7 per cent in August 2026. Service prices remain particularly stubborn, while renewed increases in food and energy costs are adding pressure.

The report also highlights untapped workforce potential. Employment remains around 50 per cent, while women’s labour force participation stands at 39 per cent, compared with 65 per cent for men. Youth unemployment is 15.7 per cent.

The budget deficit has widened to 4.8 per cent of gross domestic product, alongside growing reliance on expensive, short-term domestic borrowing. Although banks retain strong capital buffers, the report calls for close monitoring of loan quality and borrowers’ repayment performance.

A special focus on inflation finds that exchange rate movements and monetary developments in Türkiye quickly affect local prices. A 1 per cent fall in the Turkish lira against the US dollar is estimated to raise consumer prices by 0.55 percentage points within a year.

High import costs, limited supplier diversity, weak competition and wage and pension adjustments linked to past inflation reinforce these pressures.

The report recommends simpler licensing procedures, stronger competition, better-targeted social support and more reliable economic statistics. It also proposes gradually moving towards partial or forward-looking wage and pension adjustments.

Read the full English report Below or follow the link: https://www.abbilgi.eu/publications/navigating-headwinds-managing-inflation-and-uncertainty-2401