(MENAFN) The European Commission projected Monday that Türkiye's economy will demonstrate continued strength, with gross domestic product climbing 3.4% in both 2025 and 2026, before accelerating to 4% growth in 2027.

"Despite a tight monetary policy stance, domestic demand remained robust in the first half of 2025," the Commission stated in its European Economic Forecast Autumn 2025 report.

Turkey recorded robust 4.8% annual expansion during the second quarter, the report revealed, with household spending surging 5.1% year-over-year and investment activity jumping 8.8%. Third-quarter economic performance is anticipated to mirror this trajectory with minimal variation.

Growth will decelerate to 3.4% by year-end before maintaining stability through 2026 and rebounding to 4% in 2027, according to Commission forecasts. Consumer spending will drive this expansion, fueled by wealth accumulation from elevated gold valuations and sustained job market gains.

Capital investment across Türkiye is projected to climb steadily as lending conditions ease and economic prospects brighten, while trade and current account imbalances are expected to hold relatively steady, the report indicated.

Job creation will progressively gain momentum, though unemployment is forecast to remain essentially flat at 8.6% through 2027.

Inflation Battle Takes Center Stage
Turkish authorities continue prioritizing price stability efforts, yet September's annual inflation registered at what the report called elevated levels, "surprisingly" rising to 33.3%.

Agricultural output disruptions from adverse weather patterns drove food costs higher, service sector inflation persisted stubbornly, and soaring gold prices collectively intensified inflationary pressures. Policymakers are countering these forces through restrictive monetary measures, the assessment noted.

The Commission anticipates inflation will decline "only slowly" over the coming two years, averaging 24.8% in 2026 and 17.7% in 2027.

"The Turkish economy has navigated the high geopolitical and domestic uncertainties of recent years relatively successfully," the Commission stated, though noting that "internal political tensions" during spring months sparked financial market turbulence before conditions stabilized with relative speed.

Political volatility endures while domestic and international risks remain substantial, the report cautioned. However, Turkey's recent history of "sound" policies, diminished economic imbalances, and strengthened reserves may enable the nation to weather these headwinds if orthodox economic strategies are "firmly" maintained.

Separately, the report projected EU-wide economic growth at 1.4% for 2025 and 2026—exceeding January-September expectations—before climbing to 1.7% in 2027.

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