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A strong tourism season is expected to help keep pressure off the Turkish lira and support Türkiye's external balance through the fourth quarter of 2026, U.S.-based investment bank JPMorgan assessed.
JPMorgan said in a Monday report following the latest current account data that Türkiye's external balance is expected to remain favorable between July and October, as the peak tourism season brings stronger foreign currency inflows that help finance the current account deficit.
Türkiye generated $9.9 billion in tourism revenue during the first quarter of the year, up 4.2% from the same period a year earlier, while tourist arrivals rose more than 8% in March despite the Middle East conflict.
Türkiye's current account deficit narrowed to $1.5 billion in May from $5.7 billion a month earlier; however, it still came above market expectations. The annualized deficit reached $37.3 billion.
The bank expects external debt repayments to ease after June, reducing demand for foreign exchange and providing additional support for the country's external position. It also noted that current external financing conditions do not pose a major short-term risk to reserve levels if the existing outlook holds.
The Central Bank of the Republic of Türkiye (CBRT) reserves took a hit following the outbreak of the Iran conflict, with gross reserves standing at $159.7 billion in the week ending July 3, down $50.6 billion from their pre-war level of $210.3 billion.
However, JPMorgan projected Türkiye's current account deficit would reach $48 billion by the end of 2026, equivalent to around 2.8% of gross domestic product (GDP).
It estimated the shortfall would widen further to $53.3 billion, or 3% of GDP, in 2027.
The bank saw the budget deficit rising to 4% of GDP by year-end, driven by forgone tax revenues under the fuel tax buffer mechanism reintroduced in March, along with electricity and natural gas subsidies.
The lender estimated the Turkish economy would expand 3% in 2026 before picking up to 4.6% in 2027. Year-end inflation was projected at 29% in 2026 and 25% in 2027, while the policy rate was seen at 35% and 30%, respectively.
It put the U.S. dollar/Turkish lira exchange rate at 51.4 by the end of 2026 and 61.7 by the end of 2027, implying a roughly 9% increase from the current level above 47 by year-end.
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