In the Turkish economy, we observe that the growth rate, which fell below 3% in 2024 due to the tight monetary policy, tends to rise above 4% again starting from the second quarter of 2025. 2025 continues to be a year in which extremely important developments are experienced in the global economy, both economically and geopolitically. Trade wars, reignited with the beginning of Trump's second term, peaked in April and then entered a cooling-off period for a while. In early August, we observed that Trump reduced customs duties with a commitment to make high-volume investments in the US, one of its main trading partners. At the beginning of August, we encountered a situation where the US customs duty rate, which was about 3% at the beginning of the year, rose to 18%, lower than in April but still the highest since the Second World War. During this process, negotiations with China were not concluded, and customs duties, held at 30%, were fixed until the end of the talks.
In October, following China's move to restrict rare earth metal exports, a new phase in the escalating trade war began with Trump's threat to impose an additional 100% new tax on top of the existing 30% tax on China. Our prediction is that if these high customs duties and retaliations come into play, the consequences could be very negative for both the US and Chinese economies, as well as the global economy. In the current situation, we estimate that neither the US nor China can afford such a risk, and that despite remaining relatively high as a result of negotiations, an agreement will be reached for now with more reasonable customs duty levels. Despite discussing such high tax rates in the global trade war, the impact of these developments on macroeconomic data appears to be limited for now. One reason for this is that economies growing rapidly in the first half of the year due to pre-ordered shipments also keep their annual averages high, and the second is the efforts of companies exporting to the US, in particular, to avoid reflecting inflation to the final consumer by offering price reductions. In an environment where inflation has not risen significantly, the fact that demand has not changed much also seems to have limited the effects on growth. However, fiscal policy measures taken by countries to overcome the trade war, high investment demands, and the burdens brought by military expenditures seem to have started to fuel economic and political problems in many European and Asian countries. In the medium term, there is a serious possibility that you will see more negative effects of the trade war on growth and inflation.
2025 was a year not only of escalating trade wars but also of extremely heightened geopolitical risks. We are in a year marked by the dramatic occupation in Gaza, near-war conflicts between Iran and Israel, and the ongoing endless war between Russia and Ukraine. We hope that the agreement reached in Gaza some time ago will bring lasting peace. However, we maintain cautious optimism, considering that the success rate of ceasefire agreements made in the Middle East over the past 40-50 years has not exceeded 30-40%. Economic sanctions starting to show their effect in Russia and the Russian economy, which was growing at 4%, evolving towards growth rates below 1% seems to have increased Russia's likelihood of agreeing to a ceasefire. Considering that Ukraine is also close to an agreement due to war fatigue, our main scenario for 2026 is that we will be in an environment where the effects of the war in both Gaza and Ukraine have diminished. If this materializes, it could have significant positive repercussions for both the region and the Turkish economy.
In the Turkish economy, we observe that the growth rate, which fell below 3% in 2024 due to the tight monetary policy, tends to rise above 4% again starting from the second quarter of this year. The increasing growth trend continues to negatively affect inflation expectations. We are of the opinion that the upward risks of inflation rates, which we expect to gradually bottom out in the 25-30% band, have increased with the prioritization of growth. We observe that the prominence of exchange rate policy with the real appreciation of the TL in the fight against inflation has led to serious disruptions in the competitiveness of many sectors. With the contribution of companies trying not to lose market share despite high prices, high costs, and decreasing profit margins, the production process continues horizontally for now. However, we also believe that the process is not sustainable. Assuming that the real exchange rate policy will continue in the upcoming period, which will not allow depreciation even if it does not appreciate in real terms, we see a high probability that this process will be attempted to be maintained through macro-prudential policies and steps taken regarding credit supply and costs in the industrial sector for much of 2026.
Our estimate is that we will complete 2025 and 2026 with a growth rate of between 4-5%. The inflation rate also appears to be a candidate to remain in the 25-30% band, although risks are upward. We believe that the plastics sector, which has a very large place in the Turkish Economy with a turnover exceeding 40 billion dollars, will continue to feel the difficulties in competitive conditions, especially within the framework of external demand, in 2026.
This content has been translated using artificial intelligence technology.