ANKARA: Turkiye’s economy cooled in the first quarter of this year (1Q26) as the central bank moved to tighten monetary policy to deter risks related to the Iran war.
Gross domestic product (GDP) only expanded 0.1% in 1Q26 from the previous three months on a seasonally-adjusted basis, data yesterday showed.
That’s down from 0.4% in the prior three months and worse than every estimate in a Bloomberg survey of economists, whose median was for 0.3% expansion.
On an annual basis, GDP growth reached 2.5% in 1Q26, compared with 3.4% in the preceding period.
The data come as Turkiye faces renewed risks from the conflict in Iran, a shock that has pushed up energy-market volatility and complicated the Turkish central bank’s efforts to curb inflation.
Turkiye imports most of its oil and natural gas, making the economy particularly vulnerable to higher global energy prices.
The central bank reversed its easing cycle earlier this year and raised a key interest rate to contain market volatility stemming from a broader selloff in emerging markets assets.
Last month, the country’s monetary authority sharply revised its year-end inflation target to 24% from 16%, citing elevated energy and food prices.
Prior to yesterday’s GDP reading, some global banks suggested that the policymakers may consider raising rates in June. The next rate-setting meeting is scheduled for June 11.
“We had thought that pressure on the lira from a higher energy import bill, as well as the political turmoil a few weeks ago, would prompt the central bank to raise policy rates at next week’s Monetary Policy Committee meeting.
“We haven’t dropped that forecast, but the decline in oil prices since late last week and this GDP release make such a move somewhat less likely,” William Jackson, chief emerging markets economist at Capital Economics, wrote in a note. — Bloomberg
