Economy
Türkiye’s economy grows 2.5% in Q1 despite shocks
Türkiye’s economy lost momentum in the first quarter of the year, but still remained in positive territory despite the fallout from the Middle East conflict, official data showed Monday.
Gross domestic product (GDP) expanded 2.5% on a yearly basis in the January-March period, compared with 3.4% in the previous quarter, according to Turkish Statistical Institute (TurkStat).
The slowdown coincided with the start of the U.S.-Israel war on Iran, which sent energy prices soaring and revived inflationary pressures.
Authorities had already been pursuing tight monetary policy to sustain disinflation trend, which slowed in recent months as the Iran war pushed energy-market volatility.
Despite multiple shocks and global uncertainty, Treasury and Finance Minister Mehmet Şimşek said the economy maintained uninterrupted growth for 23 consecutive quarters, adding that national income had exceeded $1.6 trillion.
“Global uncertainties and the weak outlook among our trading partners, together with net external demand, limited growth,” Şimşek wrote on the social media platform X.
GDP grew 0.1% from the previous quarter on a seasonally and calendar-adjusted basis, down from 0.4% in the prior three months, the TurkStat data showed.
Surveys had expected a 2.7% annual expansion and about 0.3% growth quarter-over-quarter.
The data also showed the calendar-adjusted chained volume index of GDP increased by 2.6% compared with the same quarter of the previous year.
There was no revision to the 2025 growth rate of 3.6%, the data showed. After growing 4.7% in the second quarter last year, growth slowed to 3.8% and then 3.4% in the following two quarters.
At current prices, GDP rose 35.7% year-over-year to TL 16.99 trillion ($389.6 billion) in the first quarter of this year.
Among economic sectors, information and communication recorded the strongest annual growth, with value added increasing 9.5%.
Other services activities grew 5.2%, followed by agriculture, forestry and fishing at 4.6%, trade, transportation, accommodation and food services at 3.7%, financial and insurance activities at 3.5% and construction at 3.2%.
Real estate activities expanded 3%, while taxes less subsidies on products increased 2%. Professional, administrative and support service activities rose 1.9%, and public administration, education, human health, and social work activities increased 1.8%.
The industrial sector, however, contracted 0.8% during the period.
On the expenditure side, final consumption expenditure of resident households rose 4.8% year-over-year in the first quarter, while government final consumption expenditure increased 2.1%.
Gross fixed capital formation climbed 3%.
Exports of goods and services declined 12.7% year-over-year, while imports of goods and services fell 2%.
Şimşek said industrial value added contracted in the first quarter due to global conditions and calendar effects, while noting growth in agriculture after last year’s decline caused by frost and drought.
He said agriculture is expected to support growth this year.
“Although rising energy costs have caused a temporary slowdown in the disinflation process, our determined stance in the fight against inflation continues,” he stressed.
Consumer prices rose 4.18% month-over-month and 32.37% on an annual basis in April, mainly driven by pressures amid the fallout from the Iran war.
The domestic producer index rose 3.17% month-over-month for an annual increase of 28.59%.
The Central Bank of the Republic of Türkiye (CBRT) has flagged rising inflation risks, saying it’s closely monitoring the fallout of the conflict and potential second-round effects.
Last month, the bank raised its end-2026 interim inflation target to 24% from 16% and lifted its end-2027 target to 15% from 9%. It set its end-2028 interim target at 9%.
The current outlook “may translate into a more marked slowdown in the second half of the year,” analysts at the Dutch financial giant ING said.
But a potential resolution of the Iran war “could help alleviate the current downside pressures on the economic outlook, providing some relief to growth prospects,” they wrote.
Türkiye and Azerbaijan are expanding their energy partnership beyond oil and gas into electricity transmission and green energy corridors, Energy and Natural Resources Minister Alparslan Bayraktar said on Monday.
Speaking at the opening of Baku Energy Week, Bayraktar said Türkiye, Azerbaijan, Georgia, Bulgaria and southeast European countries were working to strengthen regional energy connectivity.
“We are going to create the electricity version of TANAP,” Bayraktar said, referring to the Trans-Anatolian Natural Gas Pipeline that carries Azerbaijani gas to Europe through Türkiye.
“You will be hearing much more in the coming weeks and months about the project to carry the electricity resources to Türkiye and, through Türkiye, to Europe,” the minister noted.
The project could extend as far as Central Asia in the future, he said, adding that this would strengthen electricity trade and energy security on a regional scale.
Türkiye is planning a $30 billion upgrade to its electricity transmission and distribution system over the next decade to accommodate higher renewable, and also nuclear, energy output.
Ankara also plans to upgrade its electricity transmission connections with eastern neighbors Georgia and Azerbaijan, as well as its European neighbor Bulgaria, to trade surplus energy.
In a message to the conference, President Recep Tayyip Erdoğan said the proposed Green Electricity Transmission and Trade project linking Türkiye, Azerbaijan, Georgia and Bulgaria is expected to contribute to the energy security of the wider region.
Bayraktar hailed what he described as “exemplary” energy cooperation between Türkiye and Azerbaijan.
The two countries have successfully implemented a series of major energy infrastructure projects, including TANAP, the Baku-Tbilisi-Ceyhan (BTC) oil pipeline and the Baku-Tbilisi-Erzurum natural gas pipeline.
“Together with Azerbaijan, Türkiye makes a significant contribution both to its own energy supply security and to Europe’s energy supply security,” Bayraktar said.
The minister also referred to talks about Turkmen gas being transported to Türkiye and Europe via Azerbaijan.
“All of our counterparts are extremely interested. Perhaps in terms of timing, we have now reached a point where everyone will say ‘yes,'” he said.
Erdoğan also said there are major opportunities to improve cooperation on exporting Turkmen gas via Azerbaijan and Türkiye.
The economic shock from the Iran war hit European factories last month, suppressing demand for their goods and pushing up raw material costs at the fastest rate in four years, although their Asian peers saw activity expand due to stockpiling, surveys showed Monday.
The U.S.-Israeli conflict with Iran, which began in late February, has upended trade, rattled financial markets and raised concerns over global energy supplies, particularly through the Strait of Hormuz, a key route for oil and gas shipments.
Monday’s surveys came after the heads of the International Energy Agency (IEA), International Monetary Fund (IMF), World Bank and World Trade Organization (WTO) warned the war was straining global energy supplies.
S&P Global’s Eurozone Manufacturing PMI fell to 51.6 in May from April’s near four-year high of 52.2, but ahead of a preliminary estimate of 51.4.
A reading above 50.0 indicates growth.
“Although euro area manufacturers reported an expansion for a fourth successive month in May, the sector is showing signs of struggling under the weight of rising prices and supply disruptions emanating from the war in the Middle East,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
In Germany, Europe’s largest economy, the manufacturing sector stalled while French factories saw a contraction for the first time since November.
The European Central Bank (ECB) will hike its deposit rate this month and at least once more this year to try to stop higher energy prices feeding into core inflation, according to a majority of economists polled by Reuters in May.
Official data due on Tuesday is expected to show inflation rose further above the ECB’s 2% target last month.
British factories raised their prices at the fastest rate since June 2022 last month in response to a big increase in costs.
Asian buffers
Still, factory activity expanded in most Asian economies.
China’s private sector gauge grew for a sixth straight month and South Korea’s hit the fastest pace in five years, highlighting a region-wide push to build buffers against potential conflict-led disruptions.
The RatingDog China General Manufacturing PMI, compiled by S&P Global, fell to 51.8 in May from 52.2 in April, but was slightly better than analysts’ forecast of 51.6. That outcome contrasted with an official survey showing factory activity in the world’s second-largest economy stalled last month as new orders contracted and input costs kept rising.
Japan’s factory activity also expanded with the PMI at 54.5 in May, slowing from April’s more than four-year high of 55.1, though firms there reported the sharpest rise in input costs since September 2022 due to higher raw material prices.
South Korea’s PMI rose to its highest since March 2021 at 54.8 in May, up from 53.6, again underlining firms’ drive to lock in supplies.
In Vietnam, the factory PMI gauge rose to 52.8 from 50.5, while Taiwan’s rose to 56.1 from 55.3, surveys showed. The index for the Philippines jumped to 50.8 from 48.3.
Natural gas supplies launched to Syria through a joint initiative by Türkiye and Azerbaijan are helping support the country’s reconstruction and regional stability, President Recep Tayyip Erdoğan said Monday.
Türkiye and Azerbaijan launched gas exports to Syria last August, with the initial delivery plan foreseeing flows of 1.2 billion cubic meters annually.
The contributions of the supplies to Syria’s development and regional security are “indisputable,” Erdoğan said in a message to the Baku Energy Week conference.
His remarks were delivered by Energy and Natural Resources Minister Alparslan Bayraktar during the event’s opening session.
Gas is transported through Turkish territory to Syria under a coordinated arrangement from Shah Deniz gas field in the Azeri Caspian Sea.
The gas is used to restart power plants in Syria and support basic energy needs in areas affected by conflict.
Türkiye supported opposition forces in Syria throughout the 13-year civil war that ended with the ousting of longtime dictator Bashar Assad in December 2024 and has become one of the new Syrian government’s main allies.
Erdoğan said recent regional developments had demonstrated the importance of energy steps taken by Türkiye and Azerbaijan. He stressed the two countries had successfully implemented a series of major energy infrastructure projects once considered unattainable for the region.
He cited the Baku-Tbilisi-Ceyhan (BTC) oil pipeline, the Baku-Tbilisi-Erzurum natural gas pipeline and the Trans-Anatolian Natural Gas Pipeline (TANAP), which carries Azerbaijani gas to Europe through Türkiye.
TANAP-style electricity corridor with Azerbaijan
Addressing the forum, Energy Minister Bayraktar said Türkiye and Azerbaijan were expanding their energy partnership beyond oil and gas into electricity transmission and green energy corridors.
He said Türkiye, Azerbaijan, Georgia, Bulgaria and southeast European countries were working to strengthen regional energy connectivity.
“We are going to create the electricity version of TANAP,” Bayraktar said.
Türkiye is planning a $30 billion upgrade to its electricity transmission and distribution system over the next decade to accommodate higher renewable, and also nuclear, energy output.
Ankara also plans to upgrade its electricity transmission connections with eastern neighbors Georgia and Azerbaijan, as well as its European neighbor Bulgaria, to trade surplus energy.
Erdoğan said cooperation between Türkiye and Azerbaijan deepened further through joint participation in the Azeri-Chirag-Gunashli and Shah Deniz hydrocarbon fields, while a new partnership in the Shafag-Asiman offshore project demonstrated the continued expansion of bilateral ties.
The president also highlighted the strategic importance of the Iğdır-Nakhchivan natural gas pipeline, which entered service last year and strengthened energy security in Azerbaijan’s exclave.
“Electricity interconnections between Türkiye and Azerbaijan continue to hold strategic importance for us,” Erdoğan said.
He added that the proposed Green Electricity Transmission and Trade project linking Türkiye, Azerbaijan, Georgia and Bulgaria is expected to contribute to the energy security of the wider region.
Turkmen gas exports
On regional energy routes, Erdoğan said there are major opportunities to improve cooperation on exporting Turkmen gas via Azerbaijan and Türkiye.
He added that the Baku-Tbilisi-Ceyhan pipeline is being used increasingly to transport Kazakhstan’s natural resources to Western markets.
Türkiye has a vision to ensure effectiveness across all dimensions of energy, including renewable and green energy, based on efficiency and respect for the environment, Erdoğan said.
Türkiye, he added, will reinforce its determination to be among the leading and exemplary countries in global climate action by hosting the COP31 conference in the Mediterranean city of Antalya between Nov. 9-20.
Manufacturing sector in Türkiye neared stabilization midway through the second quarter, as output returned to growth in May and export orders rose for the first time in 21 months, a closely-watched business survey showed on Monday.
The Istanbul Chamber of Industry (ISO) Türkiye Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 49.8 in May from 45.7 in April, a survey by S&P Global showed. The 50-mark separates growth from contraction.
The May reading was the highest since March 2024.
“The Turkish manufacturing sector moved in a more positive direction in May as renewed growth of exports helped to support a slight rise in production,” said Andrew Harker, economics director at S&P Global Market Intelligence.
Production increased in May after a sharp slowdown in April. The survey said panelists reported signs of improving demand, particularly internationally.
New export orders rose, ending a 20-month run of decline, while total new business still eased slightly as firms cited uncertainty, higher prices and the war in the Middle East.
Where new orders moderated, the survey said, panelists linked this to uncertainty, higher prices and the Iran war.
Employment fell again, but at the slowest pace so far in 2026.
Firms also increased purchasing activity for the first time in just over two years, partly to build safety stocks as prices rose and supply chains were disrupted.
“Despite this, stocks of purchases continued to soften, albeit at a much slower pace than in April,” the survey said.
Input costs continued to rise sharply, with firms citing higher fuel, oil, metals and transportation prices, though both input cost and output price inflation eased.
Suppliers’ delivery times lengthened for a seventh consecutive month.
“There is some question therefore as to whether the expansions seen in May can be sustained given ongoing sharp rises in input costs and supply-chain delays,” Harker said.
“Much will likely depend on whether total new orders can join exports in growth territory in the months ahead.”
Tech investor SoftBank Group dethroned automaker Toyota to become Japan’s most valuable company, as the benchmark Nikkei index briefly reached a new high on Monday amid the continued artificial intelligence boom.
SoftBank, a major backer of ChatGPT maker OpenAI, soared more than 11% in the afternoon trade, after its founder announced a 75-billion-euro ($87.5 billion) investment in AI infrastructure in France.
Masayoshi Son told La Tribune Dimanche weekly on Saturday that it “will be the largest investment in Europe in infrastructure related to artificial intelligence.”
SoftBank said last month its annual net profit quadrupled to more than $30 billion, mainly thanks to its investment in OpenAI.
The company’s market capitalization grew on Monday to more than 47 trillion yen, while Toyota’s fell to just under 46 trillion yen after its shares dropped nearly 5%.
The third-largest is chipmaker Kioxia, formerly the semiconductor unit of the engineering giant Toshiba. It jumped more than 8%.
Global demand for the chips has been driven by the growth of AI technology.
The Nikkei index briefly surpassed 67,000 for the first time in the morning trade.
Turkish economy expanded 2.5% on a yearly basis in the first quarter, official data showed on Monday, with growth slowing for a third consecutive quarter but staying positive despite tighter monetary conditions and the recent Iran war.
The slowdown in growth in the January-March period partially coincided with the start of the U.S.-Israel-Iran war, which sent energy prices soaring and revived inflationary pressures.
The strongest branch of economic activity during the first quarter was information and technology, which grew 9.5%, while agriculture, forestry and fishing grew 4.6%, Turkish Statistical Institute (TurkStat) data showed. Industry shrank 0.8%.
The lira was little changed at 45.9160 against the dollar after the data.
TurkStat said first-quarter gross domestic product (GDP) grew 0.1% from the previous quarter on a seasonally and calendar-adjusted basis,
In a Reuters poll, economic growth was estimated to have slowed to 2.7% in the first quarter, while in 2026 as a whole the economy is expected to expand by 3.15%.
There was no revision to the 2025 growth rate of 3.6%, the data showed. After growing 4.7% in the second quarter last year, growth slowed to 3.8% and then 3.4% in the following two quarters.
Economists are closely monitoring the central bank’s response to the inflation, which surged to 4.18% month-over-month in April for an annual rate of 32.87%. In its second inflation report of the year, the central bank raised its year-end inflation interim target from 16% to 24%, while signalling that all options remain on the table for its next interest rate decision.
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