World Bank2024-06-032024-06-032024-06-03https://hdl.handle.net/10986/41641Türkiye’s economic policies helped quickly recover from the COVID pandemic. The policies being implemented since late 2021 were built on loose monetary policy, prudent fiscal policy, boosting exports and employment, and managed to deliver strong GDP growth in 2022. These policies, -in addition to the rise in energy prices amid geopolitical tensions and the global monetary tightening cycle-, however also led to a very rapid increase in inflation, a widening of the current account deficit and the decline in the reserves which in turn affected investors’ risk perception adversely and increased macro financial pressures in the run up to the May 2023 elections. As a consequence, the growth momentum also slowed down starting from the second half of 2022. Following the elections, the new government started a process of normalization in macroeconomic policies in 2023H2 with an emphasis on tightening monetary policy to achieve disinflation. The monetary policy rate hikes, ongoing simplification in the macroprudential policy framework, and the correction in the exchange rate since May 2023 have helped to gradually rebuild confidence in the economy, and the tax hikes have helped reduce the fiscal deficit. The impact of the new policy framework has started to be reflected in the reduction in risk premia, realignment of interest rates, strengthening in foreign exchange reserves, and the improvements in the assessment of credit rating agencies.en-USCC BY-NC 3.0 IGOECONOMIC GROWTH DIAGNOSTICSINFLATIONMACROECONOMIC ANALYSIS OF ECONOMIC DEVELOPMENTECONOMIC GROWTH ANALYTICSDECENT WORK AND ECONOMIC GROWTHSDG 8ReportWorld Bank10.1596/41641