Turkish economic prospects show signs of improvement in December

Turkey’s economic confidence index for December 2024 released on Monday morning, inching up to 98.8, from 97.1 in November, according to the Turkish Statistical Institute. This was mainly because of improving service providers’ confidence, which rose to 113.6 in December, from 111 in the previous month. 

Confidence among retailers also edged up to 113 this month, from 111.7 in the previous month, whereas constructors’ confidence jumped to 89.4 in December from 87.8 in November. 

Coming to consumers, confidence rose from 79.8 in November to 81.3 this month. 

However, manufacturers’ confidence decreased to 102.7 in December from 103.4 in the previous month.

Is the Turkish economy looking up?

The Turkish economy has taken a severe battering over the past few years, as the Covid pandemic, soaring inflation, a widespread cost of living crisis and dampening industrial growth all took their toll. 

In October 2022, Turkish inflation reached a 24-year high of 85.5% and was still considerably elevated at 47.1% in November 2024. This was largely due to the Central Bank of the Republic of Türkiye slashing interest rates under the guidance of Recep Tayyip Erdoǧan. 

Erdoǧa believed that a looser monetary policy helped curb inflation, an economic belief which was at odds with other major central banks. This strategy also had a considerably negative impact on the Turkish lira, as well as causing other widespread damage, such as soaring rental and food prices. 

Although the central bank has since sharply reversed its strategy, Turkey’s economic damage due to this is considered to be extensive, making it likely that progress could be slow. 

However, the above figures could point towards the country gradually starting to recover from some of the significant economic challenges it has faced in the last several months. 

The World Bank says on its website: “For Türkiye to preserve and further its progress, it must navigate through significant challenges that encompass economic resilience, poverty and inclusion, and sustainability. Key among these is revitalising economic growth in a post-Covid era marked by a challenging macroeconomic climate and a downward trend in productivity observed since the mid-2010s. 

“Furthermore, although economic expansion has continued, the reduction in poverty rates has lost momentum since 2016, hindered by increasing inequality. On the environmental front, Türkiye’s industrial base and transport heavily relies on carbon-intensive processes and fossil fuels, presenting both challenges and opportunities in light of the EU’s Carbon Border Adjustment Mechanism – a critical consideration given the EU’s role as a major market for Turkish exports. 

“Lastly, Türkiye’s distinct geographic and socioeconomic conditions significantly increase its vulnerability to the adverse effects of climate change, highlighting the need for broad adaptation measures.”