Demand conditions across Türkiye’s key export markets strengthened at the fastest pace in eight months in July, driven by renewed growth in major European economies and stronger activity in the United States, a survey showed Monday.

The Türkiye Export Climate Index, compiled by the Istanbul Chamber of Industry (ISO) and S&P Global to measure business conditions in the main export destinations of Turkish manufacturers, rose to 52.2 in July from 50.4 in June.

Readings above 50 indicate improving business conditions in export markets, while those below 50 point to deterioration.

The July reading marked the greatest improvement since November 2025 and extended the index’s uninterrupted expansion that began in January 2024.

The survey showed economic activity increased in eight of Türkiye’s 10 largest manufacturing export markets during July, with only France and Poland recording contractions.

Germany, Türkiye’s largest export destination, returned to growth for the first time in four months, albeit at a modest pace.

The United Kingdom also resumed expansion. Together, Germany and the U.K. account for around 15% of Türkiye’s manufacturing exports.

Rapid growth in U.S, Europe

The United States posted its fastest rate of economic growth in nine months, while Italy recorded its strongest expansion in eight months. Economic activity in Spain accelerated to its highest level in about 18 months.

Elsewhere, growth strengthened in the Netherlands and the United Arab Emirates (UAE), while Romania’s manufacturing sector returned to expansion after 25 consecutive months of contraction.

Although economic activity declined in France and Poland, the pace of contraction eased compared with June.

Among all economies monitored by the survey, Egypt recorded the steepest contraction in output, though the decline was the mildest since March. Uganda registered the fastest growth, followed by Thailand and Singapore.

Outlook improves despite geopolitical risks

Andrew Harker, economics director at S&P Global Market Intelligence, said the latest data suggest the global economy started the second half of the year on a firmer footing, creating better opportunities for Turkish exporters.

“Growth signals from some of Türkiye’s key export markets clearly show that the global economy made a positive start to the second half of the year,” Harker said.

“Most major export markets either returned to growth or saw stronger expansion in July. These developments provided manufacturers with more opportunities to secure new business,” he added.

However, Harker said continued uncertainty surrounding the Middle East suggests the outlook could remain volatile in the coming months.

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Türkiye’s industrial production expanded in the second quarter despite challenging global conditions, Treasury and Finance Minister Mehmet Şimşek said Monday.

Şimşek’s remarks came after the Turkish Statistical Institute (TurkStat) data showed industrial output grew 1.9% year-over-year in the April-June period.

In a post on X, Şimşek highlighted what he said was continued growth in high-technology manufacturing and an improving export mix.

He added that production in high-technology industries increased 3.9% in the second quarter, while the share of medium-high and high-technology products in manufacturing exports reached 44.5% as of June.

“The strong increase in value-added production and the improvement in the composition of exports are concrete indicators of the transformation taking place in industry,” Şimşek said.

“Through our productivity-focused policies, we will continue moving up the global value chains,” he added.

The TurkStat data showed the industrial production index fell 1.4% year-over-year in June, the steepest annual decline since January 2026.

On a monthly basis, however, industrial output edged up 0.1%.

According to TurkStat, manufacturing output, the largest component of industrial production, declined 1.5% from a year earlier in June, while mining and quarrying production fell 1.6%.

Output in the electricity, gas, steam and air conditioning supply sector rose 1.1% on an annual basis.

Compared with May, mining and quarrying output declined 0.5%, manufacturing production was unchanged, while electricity and utilities output increased 1.5%.

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For those in Europe who still saw climate change as a problem for future generations, this summer’s intense heatwaves have made clear that its expensive and life-altering economic consequences have already begun to unfold.

Record heat and droughts this summer – which scientists say are exacerbated by global warming – have wreaked havoc in power production, shipping and public health systems, while this wildfire season is on ⁠track to be Europe’s biggest ever.

Together, the hit to the region’s economy ⁠can already be measured in the hundreds of billions of euros, economists and academics estimate. But they warn this is just the beginning, as costs are set to rise faster than temperatures.

Climate is changing more rapidly in Europe than on any other continent and the damage is already stretching public finances, setting off wild swings ​in inflation, redrawing the tourism map, and forcing the bloc to rethink how power is produced and how goods are transported.

“What makes ​2026 ⁠particularly worrying from an economic perspective is that there are multiple episodes of extreme events,” said University of Mannheim economist Sehrish Usman.

“Take heatwaves, droughts, wildfires… these events are taking place at the same time and mostly in the same regions, compounding their impact,” she said.

Record economic damage from heat

Temperatures hit records in June and July, and the economic damage will likely exceed all previous marks, economists say.

Traffic on the Rhine and the Danube rivers, key cargo arteries, is severely limited because of low water levels, and more than a half dozen nuclear generators have shut or curtailed production due to cooling difficulties.

Agricultural yield estimates have been cut, with crops harvested late, such as maize and sunflower, suffering a 6%-7% loss already in July. Heat curtails human productivity and has already claimed tens of thousands of lives, with Germany alone reporting more than 10,000 heat-related deaths.

Meanwhile, the costs of the emergency response, like fighting fires or curtailing power use, further stretch budgets.

ING estimates that the halt of traffic on the Rhine alone will lower the GDP of Germany, the world’s third-largest economy, by 0.3 percentage points this year, while Hungary’s MBH Bank sees a 0.1 percentage point GDP hit for every week the country’s largest nuclear generator is offline.

Allianz, the German insurer, estimates the two-week June heatwave alone will ⁠cut ⁠the GDP of Europe by 0.3 percentage points, and climate change will shave 5%-7% off growth by 2030 for the most exposed economies like Spain, France and Italy.

“The total bill for this year will be much larger,” said Hazem Krichene, an economist at Allianz. “This figure doesn’t account for the fires, droughts, different flood events or the expected El Niño.”

Given that the eurozone is expected to grow just 1% this year, the hit is sizable.

Yet Usman says the full extent of the economic damage will only be felt several years down the line.

“You’d expect the damage to be largest in the year an extreme event happens and then to fade but we find the opposite,” Usman said. “The economic impact grows over the following years because the extreme weather set off a chain of slow economic consequences.”

Southern Europe to suffer falling tourism and rising inflation

Southern Europe could take the biggest hit as temperature spikes are the largest there, cutting tourism income, exacerbating crop failures and inducing outward migration.

“Can you see tourists marching through southern Italy or Spain in 45 ⁠degrees? I can’t. So, I think the nature of tourism will change,” ING economist Carsten Brzeski said.

The south may get more year-round tourists, but summer peaks will drop as vacationers move north, hitting the southern hospitality industry, Brzeski argued. The south will also take a bigger food price hit from extreme weather, complicating life for the European Central Bank (ECB), which is already struggling to keep inflation at target.

“You see bigger effects of extreme ​temperatures on food prices in places that are already hotter, so if you’re in Southern Europe, you’ll see a bigger effect,” said Maximilian Kotz, a researcher at the Barcelona Supercomputing Center.

Extreme heat ​in 2022 lifted eurozone inflation by 0.34 percentage points via higher food prices, with the south taking a disproportionate hit, Kotz estimated.

Meanwhile, a halt in river transport is making it harder for fuel to reach parts of Europe, widening regional price differences.

Heat strains on budgets to put pressure on ECB

“The fiscal consequences fall most ⁠heavily on the economies least able ‌to absorb them,” ‌Allianz said in a research note.

Reductions in annual tax revenue from lost output could reach 1.8% in France, 1.3% in ⁠Italy and Spain as progressive tax systems mean revenues fall faster than output, it estimates.

Business profit margins will ‌also decline, depressing investment and exacerbating the economic loss.

Costs meanwhile surge, both because governments have to fund the emergency response and must invest, such as in future-proofing power generation or transportation routes.

“A key concern is that countries still rely ​far too much on ad hoc emergency response, which is both ⁠expensive and also often quite inefficient,” said Heather Grabbe, a senior fellow at the Bruegel think tank.

But investors may push back if ⁠governments try to spend more. Debt levels are already high – especially in France and Italy – and countries need to invest in defense and the green energy transition.

The dilemma could draw in ⁠the ECB, which bought up trillions of euros ​worth of countries’ debt in the past decade to keep borrowing costs depressed when inflation was too low.

“With such a long list of spending needs, the trend will be towards higher government debt,” ING’s Brzeski said. “This will then mean pressure on the ECB to step in and do more quantitative easing, if there is a sudden selloff in bond markets.”

The newly signed defense pact between Türkiye, Saudi Arabia and Pakistan heralds not only a strong new security alliance but a multidimensional partnership that could help unlock new economic and investment opportunities across a wider region, analysts say.

The trio, which already harbors robust defense ties, inked on Friday in the Muslim holy city of Mecca the agreement, which stipulates that an armed attack on one signatory would count as an attack on all.

And while the “Mecca Joint Defence Agreement” is intended to strengthen collective deterrence against any act of aggression, the deal is not merely seen as a collective defense commitment but as a step that brings Ankara, Riyadh and Islamabad even closer.

Recent years have witnessed Ankara building on defense cooperation with both. In 2023, Riyadh agreed to buy Turkish drones in what Ankara called its largest defense export contract.

Similarly, Türkiye and Pakistan have expanded defense cooperation through naval projects, military training and other joint programs. In 2018, the duo launched the MILGEM project that foresees the delivery of four corvettes to Pakistan’s Navy, two of which, made in Türkiye, have already entered the force.

At the same time, the Mecca treaty is seen as having significant potential not only in the security field but also in terms of economy, energy, and trade.

The ongoing conflict between the U.S. and Iran, which has strained vessel passages through the strategically important Strait of Hormuz and recent pressure in the Red Sea have reinforced the need for alternative energy routes, and Türkiye has been positioning itself as a potentially strong leader.

While Ankara has been advocating for the expansion of a critical pipeline with Iraq further to the south, it also said it could be seen as a hub in the region, owing to its contracts and expanding oil and gas partnerships in the different regions.

‘Economic benefits’

“The defense agreement signed here is actually more than just a defense agreement; it’s an agreement that will have very significant economic benefits for the future. I believe it will have very important effects, especially considering that Türkiye, Pakistan, and Saudi Arabia are powerful countries in the region and have a deterrent effect,” an analyst, Zekeriya Şahin, told Turkish publication CNN Türk.

“Now, when evaluating this agreement, it’s necessary to consider separately the finalized economic revenue and the potential revenue stream that could arise after the Mecca Defense Agreement. And with that, I also foresee that, given the current congestion in the Strait of Hormuz in the Persian Gulf, other Gulf countries may join this trilateral agreement in the future,” he argued.

Foreign Minister Hakan Fidan said on Saturday that Egypt might join the pact as well.

“In other words, this strategic agreement could even lead to a new Gulf pact. This would, of course, also mean a strengthening of commercial relations, and one of Türkiye’s strongest areas is the defense industry, and we are in a position to transfer technology and even form partnerships in the defense industry,” Şahin added.

Türkiye, with its advanced technology and defense expertise, stands as the 11th largest exporter of arms globally, and officials are suggesting it is closing in to enter among top 10.

But apart from defense potential, Türkiye in general has steady trade relations with its Gulf partners, while it also aims to further lift bilateral volume with Pakistan.

Last month, Istanbul hosted a large Pakistan-Türkiye Business Conference, where officials from both countries emphasized the potential to further strengthen economic cooperation in a number of fields, from logistics, energy, to IT and artificial intelligence.

“The three countries are unusually complementary,” Andreas Krieg, a lecturer in security at King’s College London, told Agence France-Presse (AFP).

Trade relations, potential

Türkiye’s strong diplomatic and commercial ties with the countries members of the Gulf Cooperation Council (GCC) have positively reflected on recent trade figures, as exports to the region surged 35.7% year-over-year to surpass $826 million in June.

Saudi Arabia recorded the largest increase in export value in June compared with the same month in 2025, rising by approximately $229.8 million, the data sourced from Türkiye Exporters Assembly (TIM) reveals.

Saudi Arabia has, thus, become Türkiye’s largest Gulf export market and the country recording the strongest export growth in the region – the performance which is attributed to bilateral ties but also to the kingdom’s Vision 2030 program.

In this regard, the role of globally-renowned Turkish contractors plays an important role and carries significant potential.

Coupled with the potential of the proposed Development Road Project, which foresees Türkiye as a key link for intercontinental trade, the defense pact could reap economic benefits for the actors in the region.

Among others, Türkiye’s robust and expanding economic ties with Saudi Arabia have seen the signing of an intergovernmental agreement for renewable energy investments worth approximately $2 billion, reached earlier this year.

The combined and relatively young and dynamic population of Türkiye, Pakistan and Saudi Arabia, which stands at about 380 million, also carries potential for closer inter-people relations and cooperation.

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Trade Minister Ömer Bolat said on Sunday that a new daily record for truck departures in 2026 was set on Aug. 7 at the Habur Border Gate, with 2,454 trucks leaving the country.

Pointing out that Türkiye’s trade strength is extending beyond its borders and that its influence on regional trade routes is increasing day by day, Bolat announced the record through a post on his NSosyal account.

“On Friday, Aug. 7, we set the daily truck departure record for 2026, with 2,454 trucks passing through our Habur Border Gate in the Silopi district of Şırnak province,” he noted, referring to the busy crossing with Iraq.

Bolat stated that the record “is a strong indication on the ground of the growing trade with neighboring Iraq, new transit trade corridors extending toward the Gulf countries, and Türkiye’s determination to become a regional logistics hub.”

The minister also emphasized that the Habur Border Gate is not only important for Türkiye-Iraq trade, but also stands out as one of the most important crossing points along the strategic Silk Road trade corridor connecting Türkiye through Iraq to the Gulf and to wider markets.

“In the Century of Türkiye, we are expanding our trade routes, strengthening our logistics infrastructure, and enabling our exporters to reach the world faster and more effectively,” he wrote.

“The daily record of 2,454 trucks is a tangible indication of our growing trade and strengthening logistics capacity,” he added, while thanking exporters, drivers and customs employees who made the achievement possible.

“We will continue with determination to expand our country’s trade routes, increase our exports, and make Türkiye a regional trade hub,” he pledged.

“Türkiye is producing, exporting and opening up to the world.”

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Germany’s trade gap with ⁠China grew in the first half of the year, even as the Asian powerhouse kept the position of its top trade partner, preliminary data from state-run agency Germany ​Trade & Invest (GTAI) showed on Sunday.

German exports to China fell ​over ⁠12% year-over-year to just under 37 billion euros ($42.8 billion) between January and June, the data showed, as Chinese firms cut reliance on European imports, making China only the ninth-biggest market for German goods.

As recently as 2021, China was the second-biggest export market.

That year, Germany sold China merchandise worth 104 billion euros, despite the effects of the COVID-19 pandemic. Now, German manufacturing is struggling with both U.S. tariffs and Chinese competition, triggering major job cuts at bulwarks of industry such as carmaker Volkswagen.

China, though, is selling more and more to Germany.

In the first half of last year, ⁠Germany ⁠ran a trade deficit of 40 billion euros with China. That had swelled to some 55 billion euros during the same period this year.

German imports from China rose 8.9% to 91.8 billion euros over the period. Total trade was over 128 billion euros, some 3 billion euros more than with the United States.

“The reasons for declining exports to China are the weak domestic economy and increasing (Chinese) focus on domestic value chains,” said GTAI East Asia expert Corinne Abele.

German firms are now producing more inside China itself, while ⁠China’s property crisis and cash-strapped regional governments are curbing investment, Abele added.

Far smaller economies like Austria and Switzerland have bought more German goods than China in 2026, the data showed.

China’s diminishing ​reliance on Germany showed it is becoming more independent of Western powers and ​catching up technologically, said Commerzbank economist Vincent Stamer.

China overtook the U.S. as Germany’s top trading partner in 2025 after U.S. President Donald Trump returned ⁠to ‌the White House ‌and launched protectionist tariff policies that have eroded German exports ⁠to the United States.

The U.S. remains Germany’s ‌single-biggest foreign market, but exports there fell about 6% through June to just over 74 billion euros, Abele said. ​By contrast, German imports from ⁠the U.S. grew 7.1% to nearly 51 billion euros.

France and the ⁠Netherlands were the next biggest export markets. Overall, German exports rose 3.7% to 817 ⁠billion euros through June as ​global growth kept orders flowing.

“But the ‘Made in Germany’ brand must still reinvent itself,” said Commerzbank’s Stamer.

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