Türkiye Bends but Does Not Break

Türkiye is facing an economic 'perfect storm' due to regional conflict, high energy import dependency, and political uncertainty. However, the economy shows increased resilience compared to 2022 thanks to stronger foreign exchange buffers and a return to conventional monetary policy.

Key Takeaways

• 1.Türkiye is more resilient to the 2026 energy price shock than in 2022 due to stronger FX reserves and a shift to orthodox monetary policy.
• 2.Inflation outlook is dampened by energy and potential food price increases, delaying interest rate cuts.
• 3.Political uncertainty surrounding the 2028 elections, particularly following legal actions against opposition figures, poses a risk to business sentiment and investment.

Table of Contents

• War in Iran – a perfect storm for Türkiye?
• Türkiye's double exposure: high energy imports and geographical proximity
• Türkiye's energy mix: Strong dependence on imports from Russia
• Energy intensity and import dependence
• Where does Türkiye buy most of its oil and gas?
• Energy crisis: a déjà-vu from 2022?
• A more favourable macroeconomic configuration compared to 2022
• Cautious businesses despite more optimistic consumers
• Inflation outlook: delayed transition to a single digit
• Stronger-than-expected price pressures
• But pressures on food prices are yet to materialize
• The CBRT's multi-faceted response strategy
• What's next for inflation and monetary policy?
• Heightened political uncertainty ahead of 2028 elections

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