Moody's Forecasts Turkish Growth Slowing to 3.4% in 2024, Accelerating by 2027

Moody's Investors Service projects Turkey's 2024 growth rate to decelerate to 3.4%, with a rebound to 4.2% by 2027.

Underlying Drivers of the 2024 Slowdown

■Global rate hikes and domestic inflation pressures are dampening growth momentum.

■Commercial credit growth fell from 6.5% to 4.2%, tightening financing for SMEs.

■Export demand uncertainty and volatile energy prices are weighing on the external sector.

Catalysts for the 2027 Upswing

■Central Bank plans to lower the policy rate from 8.5% to 6.0%.

■Credit expansion is expected to reach 9.0%, with a 15% increase in SME financing.

■Completion of structural reforms and improved investment climate should stabilize exchange rates.

Market and Investor Sentiment

■Borsa Istanbul (BIST) is expected to rally 7.5%.

■Ongoing exchange rate uncertainty is prompting greater portfolio diversification.

■Bond markets could see the 10-year yield fall from 12.3% to 10.8%.

The slowdown in 2024 reflects a mix of tighter credit conditions and external shocks. Moody's 2027 recovery outlook hinges on a gradual easing of policy rates and increased financial liquidity. Re‑energizing SME credit access will be pivotal for sustainable growth. Investors should balance short‑term volatility by allocating to foreign exchange and bonds as safe havens, while targeting quality equities for upside potential.