Macro and Politics

*TURKSTAT will release 2Q26 GDP figures today @ 10:00 local time. We estimate that the Turkish economy expanded by 2.6% YoY in the second quarter of 2026. High-frequency indicators point to some moderation in domestic demand conditions relative to the first quarter, while industrial production recorded a notable recovery. Following a 1.4% YoY contraction in the first quarter, industrial production increased by 1.9% YoY in 2Q26 (1.4% on a calendar-adjusted basis), while quarterly growth accelerated from 0.1% to 2.0% in seasonally and calendar-adjusted terms. We also estimate that the external demand outlook improved relative to the first quarter, largely supported by stronger export demand. Accordingly, despite the loss of momentum in domestic demand, we believe that the improvement in industrial production and external demand supported economic activity in the second quarter, pushing annual growth slightly above its first-quarter pace. Looking ahead to the second half of the year, under our baseline scenario of a gradual easing in financial conditions and a moderation in geopolitical uncertainties, we expect the loss of momentum in economic activity to become less pronounced, paving the way for a more balanced growth composition. Nevertheless, we do not envisage a strong and broad-based acceleration in growth. We maintain our 2026 GDP growth forecast at 3.2%.