Turkey’s inflation forecasts rise as the economy continues to face headwinds from an ongoing war in Iran and slowing domestic spending. The Organization for Economic Cooperation and Development (OECD) raised its 2026 and 2027 inflation forecasts while cutting economic growth projections.
The OECD raised inflation forecast from 28.4% to 31.5% for 2026, per Reuters. The 2027 forecast rose from 18.3% to 24.7%. Forecasted economic growth also dropped from 3.1% to 2.7% for 2026 and from 3.8% to 3.6% for 2027.
The nation has suffered from high inflation for years, with annual inflation peaking at 85.5% in 2022 and reaching 70% in May 2024 before the central bank clamped down with tighter policies.
Turkey’s economy expanded 2.3% year-over-year in the second quarter, according to Reuters, with domestic demand slipping amid tight monetary policy and the impact of the Iran war. Gross domestic product grew 1.1% from the previous quarter.
The strongest growth came from activity in agriculture, forestry and fishing, which expanded 13.3%, followed by 8.6% boost in information and communication. The Turkish economy is suffering from a larger loss in momentum in domestic demand. External demand contributed 0.6 percentage points to second quarter growth, while domestic demand dropped 1.3%.
As tensions in Iran escalate, the annual consumer price inflation was 31.75% in July, presenting a challenge for their central bank which held rates at 37% during the last four policy meetings. Tight monetary policies have been set in place to balance domestic demand and fight growing inflation, but they’ve also put pressure on economic growth.
Customers in Turkey are on average 12 days beyond terms, according to FCIB’s Credit and Collections Survey. Of the respondents with customers in Turkey, 29% do not extend credit. An additional 43% offer 31-60 day terms, followed by 14% granting 1-30 day terms and 14% extending 61-90 day terms.
Largely respondents find that payment delays are staying the same, or that there are no payment delays, but 33% of respondents are seeing an increase. Delays are most often attributed to regulatory issues (60%), customer payment policy (40%) and cash flow issues (40%).
“Monitor currency and inflation exposure,” one respondent advised. “Turkey’s volatile inflation and exchange rate fluctuations require tight credit limits, shorter payment terms and proactive monitoring of FX-denominated receivables.”
“Monitor withholding tax (WHT),” another respondent wrote. “This can erode margins if not controlled.”
