Türkiye’s economy expanded at a moderate pace in the second quarter despite a sharp slowdown in domestic demand amid tight monetary policy and the Iran war impact, official data showed Monday.

Gross domestic product (GDP) grew 2.3% on an annual basis in the April-June period, the Turkish Statistical Institute (TurkStat) said. That compared with market forecasts ranging from 2.5% to 2.9%.

Treasury and ⁠Finance Minister Mehmet Şimşek said growth would rise after the “balanced” second quarter expansion, which he said came despite heightened geopolitical tensions and difficult global conditions.

“Thanks to progress in the disinflation process and more supportive global conditions, we expect growth to gradually increase in the coming period,” Şimşek said in a statement after the data.

GDP grew 1.1% from the previous quarter on a seasonally and calendar-adjusted basis, compared with a revised 0.3% in the previous three months, the data showed.

The strongest growth by activity was shown by agriculture, forestry and fishing, which expanded 13.3%, while information and communication grew 8.6%, the data showed.

Public administration, education, human health and social work activities expanded 4%. Value added increased 3.2% in other service activities, 2.4% in industry, and 2.1% each in financial and insurance activities and real estate.

Construction was the only major sector to contract, falling 1.9% from a year earlier.

At current prices, Türkiye’s GDP rose 36% year-over-year to TL 19.87 trillion ($438.35 billion) in the second quarter.

Şimşek said annualized GDP exceeded $1.7 trillion.

Household consumption, which accounts for more than two-thirds of the economy, increased 3.5% in the April-June period. That compared to 5.1% in the first quarter. The data showed government consumption declined 1.8%.

Gross fixed capital formation, a measure of investment, grew 0.6% from the same period last year.

Exports of goods and services fell 3.4% year-over-year, while imports decreased by a sharper 6.4%.

Şimşek said the annualized current-account deficit reached $38.9 billion in the second quarter, reflecting the impact of geopolitical developments on Türkiye’s trading partners and higher commodity prices, particularly energy.

The deficit remained at a sustainable 2.3% of GDP, he added.

Haluk Bürümcekçi from Bürümcekçi Research and Consultancy said there was an “increasingly evident loss of ⁠momentum in domestic demand.”

Bürümcekçi added that the “positive contribution from net external demand after six quarters suggests that the first signs of the ‘rebalancing among demand components,’ one of the key objectives of the economic program, have begun to emerge.”

External demand contributed 0.6 percentage points to second-quarter growth, while domestic demand shrank 1.3% quarter-over-quarter, economists ⁠said, noting that this was a disinflationary development.

Turkish annual consumer price inflation cooled to 31.75% in July. The decline in inflation had stalled following a sharp rise in energy prices caused by the Iran war.

The country’s central bank has held the benchmark one-week repo rate at 37% in the last four policy meetings as ⁠it monitors Middle East conflict fallout.

While tight monetary and fiscal policies implemented to balance domestic demand and combat high inflation put pressure on growth, the economy grew by 2.6% in the first ⁠quarter, according to revised figures.

Growth in 2025 was revised to 3.7% from 3.6%.

GDP at current prices increased 41.6% to TL 63.24 trillion last year, while GDP per capita stood at TL 714,682, or $18,103.

The government’s current medium-term program projected growth of 3.8% in 2026. A new medium-term program will be announced next week.

Şimşek said the 2027-2029 road map would focus on achieving price stability, strengthening Türkiye’s growth potential through technological transformation and productivity gains and securing lasting improvements in living standards

Şimşek said the budget continued to perform positively despite the government foregoing significant tax revenue through its fuel-price adjustment mechanism launched in March to limit the impact of the Iran war.

The so-called sliding-scale system allowed reductions in the special consumption tax (ÖTV) to offset increases in global oil prices and limit their impact on domestic fuel prices and inflation.

Gross external debt remained broadly stable at 31.6% of GDP in the second quarter, Şimşek said.

Türkiye’s total debt-to-GDP ratio stood at 91%, well below the average of 229% for emerging markets and 306% globally, he added.

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The impact of AI on cyber risk is the most immediate concern for the global financial system, a global watchdog said Monday, cautioning that the technology could change the speed, scale and economics of an attack.

Many countries do not have systems in place to manage the deployment of advanced artificial intelligence models, said Andrew Bailey, the chair of the Financial Stability Board, which seeks to identify and manage ⁠risks in financial systems.

The warning by Bailey, who also serves as the Bank ​of England governor, came in a letter to G-20 finance ministers and central ​bank governors ahead of meetings this week.

The financial sector’s dependence on a handful of powerful tech providers could undermine ​system-wide market confidence, Bailey said.

The comments highlighted concerns among regulators that advanced AI ​could accelerate the discovery of cyber vulnerabilities, forcing faster patching and creating potential operational and resilience ‌challenges ⁠if testing and recovery processes are unable to adapt safely.

His comments follow the U.S. administration’s tightly controlled rollout of Anthropic’s powerful Mythos model, restricting it at one point to only U.S. nationals.

“Recent developments highlight the importance of ensuring that advances in ​capability are matched by ​resilience and preparedness,” ⁠he said.

Supporting safe and responsible model release “on a global basis” should be a priority, he said.

In July, an OpenAI ​agent escaped a controlled testing environment and hacked AI company Hugging ​Face, raising concerns about ⁠the potential for AI systems to circumvent safeguards.

Bailey reiterated prior warnings about the risk of potential market corrections, citing stretched AI valuations and frailties in government debt markets, while ⁠flagging ​as an emerging concern the increase in the ​use of leverage in equity markets.

The U.S. Treasury earlier this month intervened to cap yields on long-term ​bonds that had reached multi-decade highs.

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China’s three largest state-owned airlines posted first-half losses for the seventh straight year, hit by soaring jet fuel costs, with a weak summer season dimming the outlook for the rest of the year.

Air China, China Eastern Airlines and China Southern Airlines posted combined first-half net losses of about 8.2 billion yuan ($1.22 billion), having warned last month the figure could ​reach as high as 9 billion yuan.

The losses were a sharp reversal from their combined first quarter ​profit ⁠of 4.82 billion yuan, which was boosted by strong Lunar New Year demand, and sent their shares lower in mainland China and Hong Kong trading on Monday.

Flag carrier Air China reported a net loss of 2.3 billion yuan, widening from a 1.81 billion yuan loss a year earlier. China Eastern posted a loss of 2.2 billion yuan, versus a 1.43 billion yuan loss in the same period of 2025. China Southern reported a loss of 3.7 billion yuan, compared with a loss of 1.53 billion yuan a year earlier.

The weak results underscored the post-pandemic fragility of China’s aviation sector, as the trio confronted what China Eastern described as a profit environment “severely undermined” by disrupted international routes and persistently elevated jet fuel prices linked to the Middle East conflict.

Fuel costs at each of the carriers rose between 35% and 38% in the first half.

Unlike many Asian and European rivals, Chinese airlines hedge ⁠little ⁠of their fuel purchases, leaving them more exposed to oil price swings. China Southern said in its filing there was currently “no effective means available” to manage its exposure to jet fuel price fluctuations.

Revenue growth was strong at the carriers, with Air China up 10.5%, China Eastern up 11.1% and China Southern up 9.7%, driven by international demand. European routes were particularly buoyant as some travelers avoided Middle Eastern hubs disrupted by the Iran war.

But weaker economic conditions and competition from high-speed rail and driving holidays have hindered their ability to make substantial domestic fare hikes like those seen in the U.S. market without depressing demand.

Although jet fuel prices have fallen from their second quarter peak, they remain more than 50% above prewar levels.

Typhoon disruptions

The third quarter, typically ⁠the most profitable for Chinese carriers, has so far offered little relief, with an unusually strong typhoon season disrupting domestic routes during the peak summer travel period.

Meteorological data shows 21 typhoons have formed in the northwestern Pacific Ocean and the South China Sea so far this year, nine more than the historical ​average for the same period.

Aviation data firm Flight Master projected traffic carried by Chinese airlines on domestic and international routes would fall ​3.6% year-over-year to 142 million passengers in July and August. That would mark the first contraction in the peak season since 2022, when much of China was locked down during the pandemic.

HSBC analysts expect China’s three biggest carriers to ⁠post combined losses of ‌about 16.8 ‌billion yuan in 2026, compared with the market expectation for a combined profit of 1.3 ⁠billion yuan.

Shanghai-listed shares of all three carriers have fallen at least 36% so far ‌in 2026 as weaker domestic travel demand has continued to pressure their profit outlooks, and none declared an interim dividend.

The trio did report expanding their fleets of ​domestically made COMAC jets. China Eastern grew its ⁠fleet of narrow-body planes to 17 after taking three deliveries in the first half. Air ⁠China and China Southern each operated 11 C919s, having taken two and three deliveries respectively in the period.

China Eastern said it ⁠expected to receive 13 fewer ​C919 deliveries than previously forecast between 2026 and 2028. Air China maintained its earlier forecast and China Southern did not disclose a forecast in its interim report.

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Türkiye’s seasonally adjusted unemployment rate rose by 0.5 percentage points from the previous month to 8.1% in July, according to official data released Monday.

The number of unemployed people aged 15 and over increased by 150,000 month-on-month to 2.86 million, the Turkish Statistical Institute (TurkStat) said.

The unemployment rate stood at 6.8% among men and 10.6% among women.

The number of employed people fell by 388,000 from June to 32.36 million, while the employment rate declined by 0.6 percentage points to 48.3%.

The employment rate was 65.5% for men and 31.4% for women.

Türkiye’s labor force decreased by 238,000 to 35.22 million in July, with the labor force participation rate falling by 0.4 percentage points to 52.5%.

The participation rate stood at 70.3% among men and 35.2% among women.

The seasonally adjusted youth unemployment rate, covering the 15-24 age group, increased by 1.5 percentage points to 14.5%.

The rate was estimated at 11.3% for young men and 20.3% for young women.

Meanwhile, the composite measure of labor underutilization, which includes unemployment, time-related underemployment and the potential labor force, rose by 1.8 percentage points to 30.6%.

The combined rate of time-related underemployment and unemployment was 20.8%, while the combined rate of unemployment and the potential labor force stood at 19.5%.

Seasonally and calendar-adjusted average weekly working hours decreased by 0.4 hours from the previous month to 42 hours in July.

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Türkiye’s economy grew 2.3% year-over-year in the second quarter of 2026, official data showed Monday.

Gross domestic product (GDP) expanded 1.1% from the previous quarter on a seasonally and calendar-adjusted basis, according to the Turkish Statistical Institute (TurkStat).

Agriculture, forestry and fishing recorded the strongest annual growth among economic activities, with value added rising 13.3% in the April-June period.

Information and communication grew 8.6%, followed by public administration, education, human health and social work activities at 4%.

Value added increased 3.2% in other service activities, 2.4% in industry, and 2.1% each in financial and insurance activities and real estate.

Professional, administrative and support services expanded 2%, while trade, transportation, accommodation and food services posted growth of 0.5%.

Construction was the only major sector to contract, falling 1.9% from a year earlier.

At current prices, Türkiye’s GDP rose 36% year-over-year to 19.87 trillion Turkish liras ($438.35 billion) in the second quarter.

Household final consumption expenditure increased 3.5% annually in volume terms, while government consumption declined 1.8%.

Gross fixed capital formation, a measure of investment, grew 0.6% from the same period last year.

Exports of goods and services fell 3.4% year-over-year, while imports decreased by a sharper 6.4%.

Annual GDP grows 3.7% in 2025

Separately, TurkStat’s independent annual GDP calculations showed that the Turkish economy expanded 3.7% in 2025.

GDP at current prices increased 41.6% to 63.24 trillion liras last year, while GDP per capita stood at 714,682 liras, or $18,103.

Manufacturing accounted for the largest share of GDP at 15.6%, followed by wholesale and retail trade and motor vehicle repairs at 12.9%, and real estate activities at 9.2%.

Construction posted the strongest sectoral growth in 2025, rising 11%, followed by arts, entertainment and recreation at 8.5%, and information and communication at 7.9%.

Agriculture, forestry and fishing contracted 8.5%, while water supply, sewerage and waste management declined 5%.

Household consumption grew 4.2% in 2025 and accounted for 54.4% of GDP. Gross fixed capital formation increased 7.3%, while government consumption rose 1%.

Exports of goods and services declined 0.6%, while imports increased 4.6% last year.

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Türkiye’s steel industry maintained a positive momentum in production in July after a positive first half of the year, with output rising 7% on an annual basis, according to a report on Saturday.

Crude steel production rose to 3.4 million tons in July, up 7% compared to the same period a year earlier, Anadolu Agency (AA) reported, citing sectoral data.

According to the figures released by the Turkish Steel Producers Association (TÇÜD), production rose by 7.9% to 23.2 million tons in the first seven months of the year overall.

TÇÜD, which also provides data on consumption and foreign trade, said that finished steel product consumption, meanwhile, declined by 5.1% year-on-year in July to 3.5 million tons. Meanwhile, consumption for the January-July period increased by 4.7% to 23.3 million tons.

Foreign trade in steel products

Steel product exports, on the other hand, increased by 2.9% year-over-year in July in volume terms, reaching 1.2 million tons, while their value rose by 4.4% to $827.3 million.

During the January-July period, exports rose by 2.4% on a yearly basis in volume terms to 9 million tons, while their value rose by 1.6% to $6.1 billion.

Imports in July fell by 19.7% year-over-year in volume terms to 1.5 million tons, while their value declined by 17.6% to $1.1 billion.

In the first seven months of the year, imports decreased slightly by 3% year-over-year in volume terms to 10.7 million tons, while their value dropped by 4.9% to $7.4 billion.

The ratio of exports to imports, which stood at 76.9% in the January-July period last year, thus improved to 82.1% during the same period this year.

In a statement, TÇÜD Secretary General Veysel Yayan said the increase in production demonstrated that the sector had strengthened its production performance during the first seven months of the year.

Yayan noted that an 85% increase in exports to South America, which reached 762,000 tons, had a positive impact on total steel product exports.

Protection measures, EU exports

However, “all these developments do not yet fully reflect the negative consequences of the quota system, which is expected to lead to a contraction of approximately 4 million tons in our exports to the EU,” he said.

“In the coming months, the contraction in our exports to the EU is expected to accelerate,” he added.

“On the other hand, the presence of Chinese-origin steel products in the Turkish market continues to increase, with steel imports from China reaching approximately 2.5 million tons during the first seven months of the year,” Yayan noted.

“In this context, we believe that implementing safeguarding measures in Türkiye, similar to those already being applied in various countries, particularly the EU, the U.S., Mexico, and Canada, would make a significant contribution to increasing capacity utilization rates, supporting domestic production, economic growth, and employment.”

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