Turkiye — Growth Slowdown Needs to Be Sustained for Disinflation

Research evidence excerpt

Turkiye — Growth Slowdown Needs to Be Sustained for Disinflation

Economics Research

19 June 2026 | 12:36PM BST

CEEMEA ECONOMICS ANALYST

n We revisit the response of inflation in Turkiye to different shocks (growth, energy Basak Edizgil

+44(20)7774-9878 |

prices, wages, and FX) using a Random Forest (MRF) model that allows these basak.edizgil@gs.com

Goldman Sachs International

sensitivities to vary over time and is therefore better suited to the unstable

Clemens Grafe

Turkish macro environment in the past. +44(20)7774-3435 |

clemens.grafe@gs.com

n Contrary to the findings of past studies that emphasise a moderate growth

pass-through and the dominance of the exchange rate in Turkiye’s inflation

process, our analysis reveals a significantly stronger connection between growth

and inflation. We think that the current disinflation trajectory also supports this

finding. Underlying inflation started to trend down as activity weakened through

the first half of 2024 — the only sustained period of demand and inflation

slowdown in this cycle before both growth and core momentum stabilised. Until

April, underlying inflation had started to show signs of weakening again,

coinciding with the first noticeable growth slowdown for over a year.

n Encouragingly, we find that the impact of oil prices on inflation has weakened

significantly over time. While a lower oil pass-through and fiscal measures

buffered the direct impact of higher energy prices on inflation, the indirect effect

via worsening inflation expectations—which our algorithm suggests are among

the most relevant indicators for inflation—was large enough to drive a

re-acceleration in core momentum since March.

n The FX channel dominated the inflation process during the 2021–23 episode,

with pass-through peaking at 60% in 2022.