Morgan Stanley has released a forecast for Türkiye’s economy, predicting that the policy interest rate will reach 37% by the end of 2025. This projection is based on the country’s macroeconomic policies and its ability to provide “resilience against shocks.” The report, led by economist Hande Kucuk, notes that the Central Bank of the Republic of Türkiye (CBRT) has the necessary tools to support exchange rate stability and limit domestic savers’ demand for foreign currency.
According to the forecast, inflation is expected to decline to 30% by the end of 2025 and 21% by the end of 2026. The report also notes that real interest rates will remain relatively high in Türkiye, and credit spreads will likely remain stable in the near term due to the continuation of the reform program. Morgan Stanley believes that the CBRT has the policy space to support exchange rate stability and meet local demand for foreign currency.
Standard Chartered has also revised its forecast, reducing its expected interest rate cut from 250 basis points to 200 basis points due to political developments in the country. The bank’s economist, Carla Slim, cited “volatile domestic political ground” and higher-than-expected August Consumer Price Index (CPI) data as reasons for the adjustment. Despite this, both Morgan Stanley and Standard Chartered expect the disinflation process to continue in Türkiye, unless political developments lead to a weakening of the Turkish lira and higher inflation expectations.
The forecast for Türkiye’s economy is closely tied to the country’s political developments, which are currently creating market uncertainty. However, Morgan Stanley believes that the CBRT has the necessary tools to support the economy and maintain exchange rate stability. The predicted interest rate hike and decline in inflation are expected to support the country’s macroeconomic policies and provide resilience against external shocks. Overall, the forecast suggests that Türkiye’s economy will continue to face challenges, but the CBRT’s policies will help to mitigate these risks and support the country’s economic growth.