Economy
Housing costs claim nearly one-third of Turkish household budgets
Housing costs continue to command an increasingly large share of Turkish household budgets, as data on Tuesday showed they accounted for almost a third of their spending in 2025.
Housing and rent category’s share in total household consumption expenditures rose to 29.3% from 26% in 2024, the Turkish Statistical Institute (TurkStat) said.
Transportation ranked second with a 20.5% share, down from 21.6% in the previous year.
Food and non-alcoholic beverages wrapped up the top three categories with a share of 17.3%, compared to 18.1% in 2024, the data showed.
At the other end of the scale, insurance and financial services represented just 0.8% of household spending, up from 0.7%, while education and health accounted for 1.8% and 2.2%, respectively. That compared to 1.6% and 2.3%, respectively, in the previous year.
Property sector has long been the main cause of distress among households as prices leaped since after the COVID-19 pandemic. The stickiness remained despite a downward trend in inflation since late 2023.
The Iran war has dented progress in disinflation this year. Consumer prices rose almost 4.2% month-over-month and nearly 32.4% on an annual basis in April, mainly driven by conflict-linked pricing pressures.
According to TurkStat, housing costs rose nearly 8% on monthly basis and were 46.6% higher compared to a year ago. The calculation based on the 12-month average of the consumer price index showed the rent increase rate for May stood at 32.43%.
Tuesday’s data also showed transportation spending among high-income households was more than three times higher, as a share of total expenditure, than among low-income households.
Households in the highest income quantile allocated 25.7% of their spending to housing and rent and 25% to transportation-related expenses, including vehicle purchases, fuel, passenger transport, maintenance and repairs.
Their spending on food and non-alcoholic beverages accounted for 12.4% of total expenditures.
In contrast, households in the lowest income quantile spent 38.7% of their budgets on housing and rent and 29.2% on food and non-alcoholic beverages, while transportation represented only 8.6% of expenditures.
Spending patterns also varied according to households’ primary source of income.
Households whose main income came from wages and salaries allocated 26.4% of spending to housing and rent, 21.9% to transportation and 16% to food and non-alcoholic beverages.
For households primarily reliant on business or entrepreneurial income, housing and rent accounted for 25.5% of expenditures, while transportation represented 25.9% and food 17%.
Household size also played a significant role in spending priorities.
Single-person households devoted 41% of their budgets to housing and rent, by far their largest expense category, while spending 14.3% on food and 14.4% on transportation.
For households with six or more members, food and non-alcoholic beverages represented the largest spending category at 23.7%, followed by housing and rent at 22.4% and transportation at 18.1%.
Eurozone inflation picked up further in May as the Middle East war sent energy costs soaring, official data showed Tuesday, reinforcing the likelihood of an interest rate hike in the single currency area.
Consumer price rises accelerated to 3.2% last month, the EU’s statistics agency Eurostat said, up from 3.0% in April.
The reading was in line with forecasts from analysts polled by Bloomberg but lower than the 3.3% predicted by economists for FactSet.
Inflation in the single currency area is sharply higher than the 2% target set by the European Central Bank (ECB), following a third consecutive rise.
Of particular importance for the ECB ahead of its next meeting on June 11 is core inflation, which strips out volatile energy and food prices.
Core inflation accelerated to 2.5% in May after 2.2% in April, Eurostat said, above the 2.4% forecast by economists for Bloomberg and FactSet.
Analysts and investors have been expecting the ECB to raise rates to signal its willingness to act in keeping a lid on inflation.
“This is the expected uptick in inflation that will motivate the central bank to decide on an ‘insurance’ hike,” ING Bank’s Carsten Brzeski said in a note.
The European Union’s economy is more vulnerable to fluctuations in energy prices because it is a net energy importer.
Energy price inflation rose to 10.9% in May from 10.8% in April, while services inflation surged to 3.5% last month from 3.0% in April.
The EU executive expects inflation to remain above the ECB’s target this year.
Brussels has sharply raised its forecast for inflation in the 21-nation eurozone to 3.0% this year, after a previous prediction of 1.9%.
“For inflation in the eurozone, the only way is currently up. Not a sharp up but a rather moderate and gradual lift,” Brzeski said.
BP is on track to hand over the running of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline to Azerbaijan’s SOCAR from July 1 as part of a contractual obligation, British energy major said on Tuesday.
Operational since 2006, the pipeline has the capacity to move more than 1 million barrels per day. It is designed to deliver oil from the Caspian Sea to the Mediterranean, bypassing politically unstable regions, including Iran and Russia’s Caucasus.
Giovanni Cristofoli, BP’s regional president for Azerbaijan, Georgia and Türkiye, announced the transfer in a statement, stressing that it was not about BP divesting and that BP was “excited” to see SOCAR take over as the pipeline’s operator.
BP did not reply to a request for comment on the nature of the contractual obligations cited in the statement and what the move means for BP’s stake.
State oil firm SOCAR owns 32.97% of BTC via its AzBTC subsidiary. BP has a 30.1% stake, with the remainder held by eight other stakeholders.
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.
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