The International Monetary Fund (IMF) has reported in its latest report that G20 growth prospects have deteriorated, with forecasts of 3.2 percent for 2025, three percent for 2026, and a medium-term outlook of 2.9 percent, the weakest since the years following the global financial crisis. The resilience seen in early 2025 was largely driven by temporary factors, including front-loaded imports and inventory adjustments due to newly announced US tariff measures. As these effects faded, investment weakened across major economies and consumption remained subdued.
Geoeconomic fragmentation and protectionist industrial policies
Protectionist and interventionist industrial policies are a central concern in the IMF outlook. Around half of G20 emerging markets, including Brazil, Indonesia and Saudi Arabia, and two G20 advanced economies, Canada and the US, introduced new industrial policies within the past year. These measures, many of them trade-distorting, contribute to increasing geoeconomic fragmentation and instability in external balances.
Demographic pressures and fiscal strains across G20
Advanced economies face intensifying demographic headwinds, including rising old-age dependency ratios and shrinking working-age populations, limiting potential output and adding pressure to public finances.
Fiscal consolidation is becoming increasingly challenging. Stabilizing debt is more difficult as aging-related expenditures grow while taxable populations shrink. Inflation is expected to moderate to 3.5 percent in 2025, but output gaps remain, and spending continues to shift, particularly toward health and defense.
External imbalances widened in 2024, while income inequality remains elevated in several economies. The IMF warned that shifting trade policies and expanding industrial policies make the external environment “highly uncertain”.
Structural reform priorities: different paths for advanced and emerging economies
The IMF highlights that structural reform priorities vary widely. For advanced economies, the highest-impact reforms relate to labor-market institutions and business regulation.
For emerging markets, including Turkey, the IMF finds the strongest long-term benefits from fiscal-framework reforms and strengthened fiscal governance.
These reforms are seen as key to raising potential growth and improving resilience.
Turkey’s upgraded outlook: stronger medium-term trajectory
Turkey stands out in the report with a more favorable growth path compared with many emerging G20 peers. IMF forecasts show Turkey recording five percent growth in 2024, followed by 3.3 percent in 2025, with output stabilizing at 3.5 percent in 2026 and rising to 3.8 percent in 2028-2029. These projections position Turkey’s medium-term performance slightly above the average for G20 emerging economies.
Turkey is expected to maintain a contractionary fiscal stance in 2025 and 2026, consistent with broader trends in G20 emerging markets. However, the IMF notably recommends that Turkey adopt a less contractionary position in 2026, suggesting that a more supportive fiscal approach would better align with macroeconomic needs.
The IMF also places Turkey among emerging G20 countries where fiscal-policy framework reforms offer the greatest potential to improve long-term growth, alongside economies such as Brazil.