Turkish economy expands 2.5% in Q1

Turkey’s economy expanded by 2.5% annually in the first quarter of 2026, according to official data from the Turkish Statistical Institute (TurkStat). Growth slowed for the third consecutive quarter, reaching just 0.1% quarter-on-quarter on a seasonally adjusted basis, despite remaining positive amid tighter monetary policies and the impact of the U.S.-Israel-Iran war, which drove up energy prices and inflation. The information and technology sector was the strongest performer, growing 9.5%, while agriculture, forestry, and fishing rose 4.6%. Industry, however, contracted by 0.8%. The data confirmed no revision to the 2025 growth rate of 3.6%, with Q4 2025 growth at 3.4% following a 3.8% increase in Q3. Inflation remains a major concern, with a month-over-month surge of 4.18% in April, pushing the annual rate to 32.87%. The central bank responded by raising its year-end inflation target from 16% to 24% and signaled that all policy options, including interest rate adjustments, remain under consideration. Economists had anticipated a slower growth rate of 2.7% in Q1, with full-year 2026 expansion expected at 3.15%, according to a Reuters poll. The Turkish lira remained stable at 45.9160 against the dollar following the release of the data. The slowdown in growth coincides with the onset of the U.S.-Israel-Iran conflict, which disrupted global energy markets and reignited inflationary pressures. The central bank’s latest report underscores the challenges ahead in balancing economic stability with rising price pressures.