WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

In 2023, Turkey’s economy grew by 4.5%, driven by strong domestic demand, but constrained by declining exports. The current account deficit improved modestly in the second half of the year. However, inflation surged to 68.5% year on year in March 2024, prompting a surprise policy rate hike to 50%. The rise in inflation expectations poses a challenge to the effectiveness of monetary policy. The government’s defeat in Turkey’s recent local elections reflects public outrage over inflation and the cost of living, and increases the uncertainty regarding future economic policies.