Turkey. Political Risk Report, December 2023

Turkey. Political Risk Report, December 2023

REPORT

15 | 12 | 2023

Text

Outlook on Turkey’s economic, political, and social panorama, in a new Erdogan's presidential term

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Pattern of a Turkish carpet

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EXECUTIVE SUMMARY

Regarding the economic outlook, the report finds that Türkiye is likely to enter an economic slowdown in the short term. Its GDP growth rate is likely to decrease to 3% in 2024. Inflation is expected to continue increasing in the short term, reaching 62.5% in 2024. The appreciation of the TRY (Turkish lira) will be at the center of the Turkish Central Bank’s monetary policies given its importance in making lira revenues attractive for foreign investors. However, forecasts point to a continued devaluation in the short term, reaching 38 TRY/USD by the last quarter of 2024. The Turkish government is highly likely to incentivize FDI in the energy, infrastructure and industrial sectors. Moreover, an increase in exports is expected, which will narrow down the current account balance deficit to -3% by 2024.

In relation to energy and infrastructure prospects, the report identifies short, medium and long term revenue-generating investment areas in Türkiye. In the short term, coal, wind and hydropower are expected to boost in order to cover for the sought reduction of natural gas imports. In the medium and long term, gas, oil and nuclear energy are expected to be the leading sources of domestic production. Moreover, Türkiye is likely to seek comparative advantage in its geographical position to consolidate as a regional energy hub through the development of infrastructure such as natural gas pipelines.

The political and social outlook identifies elements of political and social instability that could negatively affect the country's economic performance. The report concludes that Erdogan's influence of power in the judiciary, military, Parliament, media and private sector through corruption will continue to generate political and social disaffection in the short and medium term. Weak social integration and the hostile attitude of Turks towards Syrian refugees will continue to fuel social division. Finally, the continuation of identity politics, which generates marginalization of religious and ethnic minorities (including Kurds), may generate social unrest in the short and medium term. However, the continuation of the government's political and social stance may be conditioned to the results of the March 2024 local elections.