Turkey Analysis from S&P Global Ratings: Inflation and Growth Forecasts

S&P Global Ratings reported that the process leading to the liquidation of approximately $18 billion in funds in Turkey did not trigger a widespread loss of confidence in the Turkish lira. The agency announced its 2026 inflation forecast as 30.9 percent and its growth forecast as 3 percent.

According to the assessment by S&P Global Ratings, a large portion of the resources exiting the fund liquidation shifted into Turkish lira-denominated bank deposits rather than foreign currency. Discussing the effects of the fund investigation that began in September and the liquidation of certain investment funds on the markets, the agency stated that compulsory asset sales caused a sharp correction in the stock market. It was noted that the rapid provision of liquidity by the Central Bank of the Republic of Turkey and targeted measures applied within the regulatory framework prevented a broader contagion in the financial system.

According to S&P's analysis, households maintaining their confidence in the Turkish lira and limited demand for foreign currency enabled the CBRT to partially rebuild its foreign exchange reserves. As of September, the share of foreign currency-denominated deposits in total bank deposits stood at 38.7 percent, remaining unchanged from the level at the beginning of the year.

Forecasting that the rise in energy prices following the war in West Asia could create upward pressure on inflation in Turkey, S&P expects annual average inflation to be 30.9 percent in 2026 and 21.7 percent in 2027. It was stated that Turkey's credit rating outlook being "stable" is based on the assumption that tight monetary policy and wage-setting policies will be maintained, and foreign exchange reserves will not be further depleted.

S&P reported that the Turkish economy grew by 3.7 percent in 2025, and it expects growth to decline to 3 percent in 2026. While the 2026 growth forecast was revised downward by 0.4 percentage points compared to the previous projection due to the economic impacts of the war in West Asia, growth is estimated to accelerate again in 2027 to reach 3.7 percent. Additionally, the budget deficit, which was at 2.6 percent of the gross domestic product in 2025, is expected to approach 3 percent in 2026, while the ratio of public debt to gross domestic product is estimated to remain below 30 percent.