Turkey’s Economic Growth Slows in Q3 Amid High Interest Rates

Turkey’s economic growth slowed to 2.1% in the third quarter, falling short of the 2.6% expected by analysts, as the high interest rate environment weighed on domestic demand, particularly in the services sector. Official data from the Turkish Statistical Institute showed a 0.2% quarterly contraction in GDP on a seasonally adjusted basis.

The central bank’s monetary tightening campaign, initiated in June 2023, has led to an increase in interest rates from 8.5% to 50% to curb inflation, which remains above 48%. While construction and financial services showed resilience, overall economic activity was dampened by slower consumer spending.

Turkey’s full-year economic growth is projected at 3%, lower than its historical trend of 4%-5%. The tightening measures, though aimed at stabilizing inflation, continue to challenge domestic demand and broader economic expansion.