Turkey's economy grows 3.2% in 2024, exceeding forecast

By Daren Butler

ISTANBUL (Reuters) - Turkey's economy grew 3.0% year-on-year in the fourth quarter of 2024, bringing full-year growth to 3.2%, official data showed on Friday, exceeding forecasts despite the weight of high interest rates.

The government, which had initially projected 3.5% growth for 2024, had trimmed its expectations to reflect ongoing adjustments in domestic demand and efforts to slow down annual inflation, which exceeded 75% in May and is now just over 40%.

Finance Minister Mehmet Simsek said balanced growth was achieved in 2024 with the contribution of 2.1 points from domestic demand and 1.1 points from net foreign demand.

"More favourable financial conditions in line with disinflation, increased predictability with our policies and improved confidence will positively affect economic activity," he said in comments on the economic outlook.

Increased growth among Turkey's trade partners, more supportive global financial conditions and moderate commodity price expectations will positively affect growth in 2025, but increasing protectionist policies in global trade and geopolitical developments are among the risk factors, he said.

Fourth-quarter gross domestic product rose 1.7% from the previous quarter on a seasonally and calendar-adjusted basis, Turkish Statistical Institute (TUIK) data showed.

The economy suffered a technical recession last year after successive drops in growth in the second and third quarters.

In a Reuters poll, the economy was forecast to have expanded 2.6% year-on-year in the fourth quarter and by 3% in 2024 as a whole.

Analysts said in the poll that growth remained fairly steady largely due to strong demand in some areas and some production trends, despite tight monetary policy.

Economists forecast 3.1% growth in 2025, significantly lower than the 5.1% recorded in 2023, the poll showed, reflecting the effect of a series of sharp interest rate hikes that started in mid-2023.

The central bank raised its benchmark rate by 4,150 basis points to cool inflation, bringing the rate to 50% in March 2024. The shift to orthodox policy, after years of low rates aimed at fostering growth, weighed on domestic demand.

After cuts of 250 basis points in both December and January, the rate is now 45%, and expected to fall to 30% by year-end.

(Reporting by Canan Sevgili and Miraç Eren Dereli; writing by Daren Butler; editing by Tuvan Gumrukcu, Kevin Liffey and Mark Heinrich)