Scope: Political uncertainty in Turkey is overshadowing the inflation outlook.

Scope Ratings has issued a warning that the recent arrest of an opposition politician in Turkey has significantly increased political uncertainty, complicating the authorities' ability to control inflation amidst escalating commercial and geopolitical tensions. The agency noted that the high financial volatility faced by Turkey could lead to higher inflation or a reversal of the current orthodox macroeconomic policy mix consistently pursued since the May 2023 general elections, which could negatively impact the country’s credit rating.

In their report, Scope highlighted that continued uncertainty is expected to dampen economic growth prospects. After a projected growth rate of 3.2% in 2024, real GDP growth is likely to slow to 3.0% in 2025. Household consumption, a key driver of domestic growth, remains sensitive to high inflation and borrowing costs. Additionally, a more pronounced economic slowdown could raise the risk of an expansionary fiscal policy, making it challenging for the government to meet its non-interest balance target in 2026.