The Turkish economy, which continues its search for balance between exchange rate pressure, high interest rates, and persistent inflation, completes 2025 with 4% growth while entering 2026 with cautious expectations. The Turkish economy is spending 2025 in a "search for balance" shaped by monetary policy tightening, exchange rate pressures, and global recession concerns. While the growth rate continues above 4%, the shadow of the foreign currency continues to hover over all balances. This picture creates a complex outlook for 2026, harboring both risks and opportunities simultaneously.
1. The Anatomy of 2025: A Balance Under Exchange Rate Pressure
In the first nine months of the year, the most challenging test for economic management was exchange rate stability. While the Turkish lira lost approximately 15% of its value against the dollar compared to the beginning of the year, exchange rate pressure increased costs, especially in energy and intermediate goods imports, despite improvements in reserves. According to TÜİK data, second-quarter growth was 4.8%, and the full-year estimate is in the 3.8–4.2% range. Although this rate indicates continued growth, it points to a structure heavily reliant on domestic demand. Industrial production increased by around 5%, while agriculture saw a 3% contraction, and construction saw a 2.1% increase. Export growth remained limited, and import pressure has re-expanded the current account deficit. The current account deficit is expected to be around 4% of GDP at the end of 2025. In contrast, the unemployment rate is still hovering in the 8.8–9.2% band; youth unemployment is around 17.5%.
2. Production and Price Stability in the Shadow of the Exchange Rate
In 2025, the depreciation of the TL kept inflation vibrant through the cost channel, while partially supporting production through the export channel. By mid-year, annual CPI reached 58%, and producer prices reached 63%. Increases in energy, food, and service items indicate that the risk of "persistent high inflation" continues. Industrial production is dynamic in export-oriented sectors, but a slowdown is observed in the production of investment goods. Investment expenditures increased by 9% compared to 2024, but in real terms, this increase is quite limited due to exchange rate and interest rate pressures. Firms face financing costs in a high-interest rate environment (policy interest rate around 50%). This has made "inventory reduction," "pressure for forward sales," and "cash flow management" priority issues.
3. 2026 Expectations: New Era, Old Problems?
Macro balances for 2026 are shaped by three main scenarios: base, optimistic, and pessimistic.
You can see the summary table below:
Indicator | 2025 Estimate |
| 2026 Base Scenario | 2026 Optimistic | 2026 Pessimistic |
Growth Rate (GDP, %) | 4,0 | 3,5 | 4,8 | 1,8 | |
Annual Inflation (CPI, %) | 58 | 38 | 30 | 65 | |
USD/TRY (Year-end) | 39,0 | 43,5 | 41,0 | 49,0 | |
CBRT Policy Rate (%) | 50 | 38 | 35 | 55 | |
Current Account / GDP (%) | 4,0 | 3,2 | 2,5 | 4,8 | |
Unemployment (%) | 9,0 | 8,6 | 8,2 | 9,8 |
Base scenario: An outlook where the CBRT gradually loosens its tight stance, the exchange rate experiences controlled depreciation, and growth continues moderately.
Optimistic scenario: Growth approaching 5% again with increased access to external finance, strengthening reserves, and a decrease in import dependency.
Pessimistic scenario: The exchange rate exceeding 49 TL and a sharp slowdown in growth if geopolitical risks (e.g., tension in the Middle East), energy prices, and capital outflows increase.
4. Monetary Policy and the Path of Interest Rates
The most critical issue heading into 2026: the CBRT's interest rate policy. Keeping the policy rate around 50% throughout 2025 was necessary for inflation control; however, it created significant financial pressure on the real sector. In the first half of 2026, if inflation falls below 40%, interest rate cuts may come onto the agenda. In this case, loan volumes could increase, and a revival could be seen in housing and automotive sectors. However, early easing carries the risk of creating a new exchange rate shock. Therefore, the CBRT's 2026 strategy will be centered on "measured easing + reserve accumulation." This approach can prevent a sudden jump in the exchange rate and support growth in a controlled manner.
5. Foreign Trade and Global Impacts
As the global economy enters 2026, the US entering an interest rate cut cycle and China's renewed growth initiative could create opportunities for Turkey in terms of the export channel. However, stagnation in Europe and geopolitical risks still create uncertainty. In the first eight months of 2025, exports amounted to approximately 152 billion dollars and imports to 190 billion dollars. In 2026, according to the base scenario, exports are expected to be 250 billion dollars and imports 295 billion dollars. Volatility in energy prices and the exchange rate level will be decisive in this balance. Tourism revenues are expected to exceed 47 billion dollars in 2025 and 50 billion dollars in 2026; this could play a significant role in narrowing the current account deficit.
6. Households, Wages, and Social Impact
In 2025, real wage increases were insufficient against inflation. The minimum wage increase was at 49% mid-year, but price increases eroded it quickly. In 2026, wage increases are expected to continue in an inflation-indexed manner. In contrast, real purchasing power can only recover if inflation falls to 30%. While the increase in public spending will support household expenditures, it could strain budget discipline. In the 2026 budget, non-interest expenditures as a percentage of GDP are expected to exceed 23%.
7. Corporate Front: Profit Margins Shrinking
Exchange rate volatility, high interest rates, and weak domestic demand pressured businesses' 2025 balance sheets. The average gross profit margin for industrial companies decreased from 28% to 22%. In 2026, margins are expected to recover with falling energy costs, reduced foreign currency indebtedness, and improved inventory management. Although the exchange rate advantage continues for export-oriented firms, rising raw material prices limit gains. Therefore, "value-added production and digital transformation investments" will be a priority in 2026.
8. 2026 Risk Matrix
Risk Area | Impact | Probability | Description |
Exchange Rate Shock | High | Medium | Risk above 45 TL with capital outflow or geopolitical tension |
Re-emergence of Inflation | Medium | Medium | Public wage increases and robust demand |
Global Stagnation | Medium | Medium | Decrease in EU demand may pressure exports |
Political Uncertainty | Medium | Low | Reform process after 2026 local elections may be influential |
Financial Stability | Low | Medium | Reserve accumulation and swap volume will be decisive |
9. Conclusion: From Shadow to Light, or to a New Shadow?
Growth continued in 2025, but the shadow of foreign currency still falls on every area of the economy. 2026 will be a "test year" for emerging from this shadow.
The key to success lies in three pillars:
- Exchange rate stability and reserve management,
- Trust and predictability in investment financing,
- Industrial policy focused on productivity increase and digital transformation.
If Turkey can free growth from exchange rate pressure and reduce its dependence on foreign currency in 2026, it can move "from shadow to light." Otherwise, there is a risk of returning to a high inflation – low growth spiral. Consequently, the metaphor of "growth in the shadow of foreign currency" will be key not only for 2025 but also for 2026. The success of economic management depends on its ability to shrink this shadow and create a Turkey that can grow with stability.
This content has been translated using artificial intelligence technology.