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Is Turkey losing external competitiveness?

Turkey’s economy has maintained strong external price competitiveness since the pandemic (mirrored by rapid export growth). But measures of competitiveness have shown a noticeable decline in the past year or so and will deteriorate further against a backdrop of high wage growth and inflation unless the lira adjusts accordingly. We expect policymakers to manage a 25% fall in the lira vs. the dollar by end-2025.

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