BBVA Research analyzes Turkey's defense potential and 2026 economic outlook

BBVA Research has released updated assessments regarding Turkey's economic outlook and its potential role in the European defense sector.

In the defense industry, BBVA notes that while Europe possesses a strong infrastructure, it faces bottlenecks in production scale, delivery speeds, and stock replenishment, particularly in missile defense, anti-drone systems, and ammunition. Turkey is positioned to address these gaps, specifically through the supply of unmanned aerial vehicles (UAVs), combat drones, and ammunition. Due to European Union local content and design requirements, cooperation is expected to move toward models such as joint production, local assembly, and technology sharing rather than simple direct exports.

Regarding the broader economy, BBVA maintains a 2026 year-end inflation forecast of 30% for Turkey, noting that risks remain slightly upward. The institution predicts economic growth will slow to 2.5% in the first half of 2026 before reaching a 3% annual rate for the full year. To manage inflation, BBVA suggests that a real interest rate of at least 4% to 5% is necessary. Additionally, the report forecasts a monthly nominal depreciation of the USD/TRY exchange rate within the range of 1.5% to 2%.