JPMorgan published its Turkey Macro Outlook report for the second half of 2026. The report states that geopolitical developments in the Middle East created significant pressures on the Turkish economy in the first half of the year. However, it adds that after the temporary agreement reached between the US and Iran in June, risks have diminished and the most adverse scenario in the macroeconomic outlook may have been left behind.
Energy Prices Impacted Inflation and Current Account Deficit
According to the analysis, tensions in the region drove up energy prices, negatively impacting Turkey's inflation, current account deficit and budget balance. In addition to rising cost pressures, prolonged tight financial conditions caused a marked slowdown in economic growth.
Forecast Revisions
The bank raised its year-end 2026 inflation forecast from 24 percent to 29 percent. The policy rate expectation was also increased from 30 percent to 35 percent. The bank noted that the fuel price adjustment mechanism (eşel mobil) and energy subsidies limited price shocks but increased the burden on public finances.
Accordingly, the budget deficit-to-GDP ratio forecast was raised from 3.5 percent to 4 percent, while the current account deficit-to-national income ratio was revised from 1.8 percent to 2.8 percent. The current account deficit is projected to reach $48 billion by year-end, while the 2026 growth forecast was lowered from 4.4 percent to 3 percent.
Oil Prices Under Close Watch
The report predicted that if Brent oil prices move in line with the futures curve, new energy-driven cost pressures could remain limited. According to JPMorgan's calculations, every $10 increase in Brent oil raises Turkey's inflation by about 1.2 percentage points and increases the current account deficit by about $6 billion.
Tourism Revenues and Support for Reserves
The bank forecast that strong tourism revenues in the July-October period will continue to support the Turkish lira, and that the decline in external debt repayments will help the Central Bank (TCMB) reserves strengthen again in the third quarter. It assessed that these developments could help keep pressure on reserves limited until the final quarter of the year.
Tight Monetary Policy Message to the Central Bank
JPMorgan pointed out that inflation stickiness persists and that conditions are not yet ripe for rapid monetary policy easing. The analysis stated that the growth slowdown is making a limited contribution to the disinflation process, and that the inflation outlook will be determined mainly by the exchange rate, food and energy prices, and the minimum wage increase at the end of the year.
The bank also emphasized that the Central Bank could start a gradual normalization process by pulling the effective funding rate back to 37 percent at its July meeting, but stressed the importance of maintaining a high real interest rate policy for lasting price stability.
2027 Outlook
According to JPMorgan's 2027 forecasts, the Turkish economy is expected to grow by 4.6 percent, year-end inflation to fall to 25 percent, and the dollar/TL exchange rate to reach 61.7. The report also noted that the size of the minimum wage increase to be set in December and the 2027 pension adjustments are among the topics to be closely watched in terms of economic policies and the political calendar.
