Economy
Canadian PM Carney due in Türkiye amid push for free trade deal
Canadian Prime Minister Mark Carney is set to arrive in Türkiye on a trip expected to give a new push to relations between the two countries that are working toward a free trade agreement (FTA).
Carney will travel to Ankara and Istanbul from Wednesday to Friday and is scheduled to hold talks with President Recep Tayyip Erdoğan during what will mark the first dedicated bilateral visit to NATO ally Türkiye by a Canadian leader.
The trip marks Carney’s latest diplomatic effort as he seeks to reduce the country’s reliance on the United States, by far its biggest trading partner, after a collapse in trade talks in August.
The talks with Erdoğan are meant to cover political and diplomatic issues as well as trade, defense industry, energy and mutual investment.
Carney and his delegation are also expected to meet Turkish business representatives to discuss opportunities in areas such as aviation, advanced technologies and critical minerals.
The premier has vowed to double Canada’s non-U.S. trade over the next decade and has rushed to establish ties with a host of countries, including China and India, with which it had past strains.
Relations received a boost from the NATO leaders’ summit in Ankara in July, when Carney and Erdoğan formally launched negotiations for a free trade agreement.
Türkiye has also agreed to join Canada’s Defense Security and Resilience Bank as one of 10 founding member nations of Carney’s multilateral “middle powers” bank.
The bank’s purpose is to bolster the defense of like-minded allied nations by raising up to 100 billion pounds ($134 billion) in cheap financing.
The two countries’ technical teams have worked intensively since July to define the scope and goals of the trade agreement.
Trade Minister Ömer Bolat and Canadian International Trade Minister Maninder Sidhu also met in June to discuss advancing the economic partnership. They described energy as a “promising area” for deeper cooperation, and discussed possible cooperation in nuclear energy.
Trade, tourism, investment
Türkiye’s exports to Canada last year totaled about $1.58 billion, and its imports from Canada about $1.16 billion. That put two-way trade at about $2.74 billion.
The leading Turkish exports in 2025 were boilers, machinery and mechanical appliances, at $158.8 million, followed by iron and steel at $104.4 million and articles of iron or steel at $97.0 million.
In the first eight months of this year, exports to Canada reached about $1.02 billion and imports about $955 million, bringing trade close to $2 billion.
Boilers and machinery again led exports at $96.1 million, followed by aluminum and aluminum articles at $73.8 million and edible fruits and nuts at $49.5 million.
If an FTA is signed, the two countries aim to lift trade to $7-$8 billion in the short term, and to $10 billion later.
Visitors from Canada to Türkiye rose 6.1% to 321,271 in 2025, from 302,728 in 2024. In the first eight months of 2026, arrivals rose 2.9% year-over-year to 209,176.
According to Statistics Canada, Canada’s stock of direct investment in Türkiye stood at CA$3.3 billion ($2.35 billion) as of 2025. Türkiye’s direct investment stock in Canada was CA$233 million.
Türkiye is part of a region that has an $872 billion pipeline of infrastructure projects, highlighting its investment potential and offering international and corporate investors greater exposure to the region ahead of 2030, according to a report from HSBC.
Investment in alternative logistics routes could mitigate the impact of the Iran war and make the Strait of Hormuz “redundant” in the next five years, HSBC Group CEO Georges Elhedery told an event in Dubai on Tuesday.
The report, published Monday and based on data from MEED, a Dubai-based construction industry market intelligence platform, covers the Middle East, North Africa and Türkiye (MENAT) region.
The $872 billion is part of a wider infrastructure pipeline worth $1.4 trillion.
The Iran war has shown how heavily the world relies on the Strait of Hormuz, the narrow waterway at the mouth of the Persian Gulf between Iran and Oman. A fifth of global oil and liquefied natural gas trade previously passed through it.
The conflict is pushing Gulf nations to channel resources into energy pipelines to ports, Elhedery said. He said this investment will help the region weather the fallout.
“Of course, we do wish and hope to see a resolution to the conflict,” he said, but “Hormuz, probably in five years’ time, may become redundant.”
“We do see this region being able to recover and then continue growing,” he said. “It will mean a lot of investment.”
A recent HSBC survey of over 1,600 business leaders and around 820 global institutional investors, meanwhile, found that they still considered the Gulf an attractive investment hub.
However, after growth of 3.3% in 2025, the World Bank last week forecast a deep economic contraction of 1.3% in the Middle East, North Africa and Pakistan region this year due to the war. That should be followed by a strong but uneven rebound in 2027.
HSBC’s report doesn’t say which Turkish projects are included in the $872 billion or how much of it is in Türkiye.
The country’s place in the grouping reflects its role as a route between the Gulf and Europe.
The most direct example is the Development Road, a planned corridor linking the Persian Gulf to Europe through Iraq and Türkiye. It complements the Middle Corridor, the route across Central Asia and the Caucasus.
Cargo leaving Iraq’s Faw Port, on the Gulf coast in Iraq’s far south, would travel about 1,200 kilometers by rail to Ovaköy, a crossing on the Türkiye-Iraq border in southeastern Türkiye.
Turkish officials have linked that project to Hormuz and said that, had the Development Road been completed, the world’s energy supply would have been far less affected.
Earlier this month, Türkiye opened the Çerkezköy-Kapıkule section, the longest part of the Halkalı-Kapıkule high-speed rail line, extending the network to the EU border.
The line is 229 kilometers long. It begins on Istanbul’s western edge and ends at Türkiye’s main rail and road border crossing with Bulgaria, at Kapıkule near the northwestern city of Edirne.
President Recep Tayyip Erdoğan said the line is a key component of the 2,094-kilometer Turkish section of the Development Road.
Turkish households’ confidence in the lira remains resilient, a leading rating agency suggested in a report, also suggesting that the country’s economy can withstand the effects of the energy shock resulting from the Middle East war despite the upward pressure on inflation.
The resilient household confidence in the Turkish lira and declining demand for foreign currency have also allowed the Central Bank of the Republic of Türkiye (CBRT) to partially rebuild its foreign exchange reserves, according to S&P Global Ratings’ analysis of the Turkish economy.
In this context, household confidence in the Turkish lira remained resilient throughout the year. As of September, foreign-currency deposits accounted for 38.7% of total bank deposits, unchanged from the beginning of the year.
Meanwhile, the impact of the fund investigation that began in September and the liquidation of certain investment funds remained limited, according to the S&P.
Although forced asset sales triggered a sharp correction in the stock market and led to the liquidation of approximately $18 billion in funds, the CBRT’s rapid provision of liquidity and the targeted measures implemented within the regulatory framework prevented “financial contagion.”
The fact that funds leaving these investments largely flowed into Turkish lira-denominated bank deposits rather than foreign-currency deposits suggests that these developments did not trigger a broader loss of confidence in the Turkish lira.
Moreover, according to the analysis, the energy price shock following the war in the Middle East is expected to put upward pressure on inflation in Türkiye. Inflation is forecast to average 30.9% this year and 21.7% in 2027.
S&P Global Ratings’ stable outlook for the Turkish economy reflects its assessment that Türkiye can withstand the ongoing energy price shock, provided that policymakers maintain tight monetary and wage-setting policies and avoid further depleting foreign exchange reserves.
Economic growth in Türkiye is expected to reach 3% this year, compared with 3.7% last year. Due to the war in the Middle East, this year’s growth forecast is 0.4 percentage points lower than the agency’s previous estimate. Economic growth is expected to accelerate again in 2027, reaching 3.7%.
The budget deficit, which stood at 2.6% of gross domestic product (GDP) last year, is forecast to widen slightly this year, approaching 3% of GDP. Meanwhile, public debt as a share of GDP is expected to remain low, staying below 30%.
In its latest assessment, published in April, S&P Global Ratings affirmed Türkiye’s credit rating at “BB-/B” and maintained its outlook at stable. The agency subsequently skipped its scheduled review of Türkiye, which had been expected on Oct. 16.
Türkiye will continue its efforts to have its automotive industry covered by the European Union’s draft Industrial Accelerator Act (IAA), Trade Minister Ömer Bolat said Monday after a meeting with sector representatives.
The Trade Ministry said in a statement that the “Made in Europe” policy in the draft should take account of the deep industrial integration between Türkiye and the EU.
The bloc says the proposed rules are designed to strengthen its industrial base by encouraging more manufacturing and sourcing within Europe. The measures would also push foreign manufacturers seeking access to the EU market to produce more goods locally and rely on European suppliers.
But “Made in Europe” has sparked a political dispute over which countries should be covered by the rules.
In its current form, the proposal excludes non-EU countries such as Türkiye, Britain and Morocco, where vehicle production and supplier networks are deeply integrated with Europe’s automotive industry.
Automakers with operations in those countries, along with local industry groups, argue that limiting the definition of Europe to the EU would damage supply chains that have developed across the wider region.
Bolat last week held a series of high-level talks in Brussels, where he said Ankara had worked intensively for the past year on the legislation. He said the European Commission had put forward the proposal, and that the European Parliament and EU Council would still decide on it.
Monday’s meeting in Ankara included officials from ministries and institutions with the heads and senior management of the Türkiye Exporters Assembly (TIM), the Automotive Exporters’ Association (OIB), the Automotive Industry Association (OSD) and the Automotive Suppliers Association (TAYSAD).
Türkiye’s automotive industry supports 250,000 EU jobs, according to OIB.
Concerns being conveyed
Monday’s statement said Türkiye’s priority is for the “Made in EU” policy foreseen in the draft law to respect the strong economic integration built on the customs union, as well as shared production and supply chains.
It said Turkish officials have held numerous contacts with EU institutions, member states and EU industry representatives since the start of the process, and have conveyed Türkiye’s views, expectations and sensitivities at every level.
The private sector is also making many approaches to its counterparts, the statement said, and all work is being carried out in full coordination. Participants agreed to keep pressing for the final text to reflect Türkiye’s position, both in member states’ positions and in the work of the European Council, Parliament and Commission.
Automotive at heart of integration
The ministry said the automotive sector is one of the most successful areas of the integration created by the customs union, which took effect in early 1996, and forms the backbone of industrial integration between the two sides.
It said any approach must take into account the economic integration created by the customs union, together with joint production, investment and supply networks.
It argued that a law meant to boost the competitiveness of European industry should not hurt investment and existing production networks of European manufacturers themselves. This point, the ministry said, has been the central message of nearly a year of trade diplomacy with all stakeholders in the EU, including member states, officials of the European Parliament, the Council of Ministers and the Commission, and private sector groups.
The ministry said European carmakers and industry representatives are also telling EU decision-makers how strategically important Turkish production and investment are to Europe’s automotive ecosystem, in order to avoid disrupting current production and supply chains.
“All of our work aims to develop our joint production capacity and global competitiveness together with the EU, instead of measures that narrow mutual market access,” the statement said. It said Türkiye wants the EU to adopt an inclusive approach that reflects the legal and economic realities of the customs union, and will continue its contacts with EU institutions, member states and the private sector at every level.
Vice President Cevdet Yılmaz said on Tuesday that Türkiye’s capital markets would emerge stronger once the problems in certain investment funds are resolved, cautioning against creating the impression that the whole market is under suspicion.
“Capital markets are extremely important and valuable in our development process,” Yılmaz said in a statement on the social media platform X. “With the overcoming of the problems that have recently emerged in certain funds, our capital markets will continue on their way more strongly.”
The fund scandal hit the headlines just over a month ago, prompting prosecutors to open an investigation into allegations of widespread market manipulation.
It began when several investment funds were unable to satisfy redemption demands, with regulators placing seven firms into liquidation that manage 131 investment funds. Some 455,000 individual investors have been affected.
Yılmaz, who chairs the Fund Coordination Board overseeing the liquidations, said the body is working intensively. He said administrative and judicial measures are being carried out with determination and in coordination.
So far, 85 people have been arrested in connection with the affair, according to the Justice Ministry.
Funds under ordinary liquidation have begun paying investors, while a bill setting rules for extraordinary liquidation is before Parliament and is due to be debated this week.
Ordinary liquidations are proceeding quickly and the legal provisions for extraordinary liquidation are on Parliament’s agenda, Yılmaz said. He added that efforts are underway to bring unjust and excessive gains back into the system and use them to pay investors.
Distorting measures harms investors
Yılmaz said it is wrong to distort the measures taken against abusers and manipulators in a way that casts suspicion on all capital markets and on healthy funds.
President Recep Tayyip Erdoğan said this week that turning the problem in 4.6% of funds into an attack on all capital markets would undermine the economy.
He recalled that about 10 months ago he had objected to the perception that certain rules adopted for some abused funds applied to the whole market, and had stressed the importance of sound economic communication.
He said he holds the same view today. The perception that measures against troubled funds target the funds that “operate in compliance with the rules and account for more than 90% of the market, is causing harm to the system and to investors.”
Yılmaz said the government is acting like someone removing diseased structures without harming the body. “Whenever there is a concrete problem, it is essential that the relevant authorities address that problem or the problematic funds.”
Investing not crime
Yılmaz stressed that investing in funds, shares or other capital market instruments is not a crime, but a policy supported in all of the government’s plans and programs. But unlawful transactions, disrupting the market, fraud and manipulation are crimes, he said.
Failing to make this distinction clearly would hurt both investors and the economy, he said, adding that anyone who has acted or acts unlawfully must face the consequences.
“It is the shared responsibility of all of us, particularly independent regulatory and supervisory authorities, to protect employees who comply with the rules, the system as a whole, and the rights of investors,” Yılmaz wrote.
Türkiye aims to rank as the world’s sixth-highest-earning country in the tourism sector, with a new budget of $244.5 million under the 2027 central government budget draft.
The funding, increased from $188.4 million this year, aligns with Ankara’s Medium-Term Program (MTP) and its tourism revenue targets of $70 billion in 2027, $73.5 billion in 2028 and $78.5 billion in 2029, according to a report on Tuesday.
Türkiye posted a record performance last year, generating $65.2 billion in tourism revenue, but the initial 2026 revenue target of $68 billion was revised downward to $65 billion due to ongoing conflicts between Russia and Ukraine, as well as the tensions in the Middle East.
The country is expected to improve its position in global tourism revenue rankings from a projected seventh place this year to sixth in 2027 as revenues increase, according to global tourism revenue data from the World Tourism Organization.
If the country achieves its $70 billion target next year and moves up in global revenue rankings, subsequent projections place Türkiye in fifth place by 2028.
Türkiye rose from 15th to seventh place in global tourism revenue, while climbing from eighth to fourth place in total tourist arrivals since 2017.
The country is expected to maintain its fourth-place ranking in total tourist arrivals throughout 2027-2029, while aiming to improve its standing in the World Economic Forum’s (WEF) Travel and Tourism Development Index (TTDI), moving up to 35th place from its projected 36th-place finish last year.
Ankara aims for 34th place in 2028 and 33rd by 2029, further cementing the country’s status as a top global travel destination.
The liquidation of the Turkish funds caught up in last month’s turmoil is proceeding at the planned pace, but the final wind-down will take more time, Treasury and Finance Minister Mehmet Şimşek said Tuesday.
Investors in the funds still to be settled are expected to receive interim payments of up to TL 1 million once a liquidation bill now before Parliament becomes law, Şimşek told private broadcaster Habertürk.
He added that people who made real gains of TL 10 million or more from market-disrupting activity will be asked to return the money voluntarily, and will face legal action if they do not.
The scandal broke just over a month ago, when several investment funds said they were unable to satisfy redemption demands, prompting prosecutors to open an investigation into allegations of widespread market manipulation.
Regulators placed seven firms managing 131 funds into liquidation, affecting nearly half a million individual investors. The Justice Ministry says 85 people have been arrested.
Liquidation progress
“The liquidation process is going at the speed and within the framework we foresaw,” Şimşek said. “An interim payment has been planned in liquidation, because final liquidation will take time.”
Liquidation is split into ordinary and extraordinary procedures, with ordinary liquidation applying to firms whose finances are relatively manageable. The 66 funds run by A1 Capital, Bulls and Pardus have been wound down this way, completing three of the seven companies, Şimşek said.
A total of TL 40.8 billion has been paid to 45,747 accounts.
Hedef Portföy, which has 31 funds including four money market funds, will also go through ordinary liquidation, bringing the total to four of the seven companies, the minister noted, adding that the process would probably finish by the weekend.
Atlas Portföy’s owners are in talks with the liquidating institution and have shown willingness to put resources back, he said. The remaining firms are Tera and Pusula. Only two funds still involve a complicated process, he said, without naming them.
Investors in equity funds have received about 58% of what they had invested as of Sept. 17, Şimşek said, while those in money market funds earned a 1.43% return.
Recovering gains
Once the bill that is due to be debated at Parliament this week becomes law, payments of up to TL 1 million will be made quickly, depending on the resources in each fund, the minister said.
Small investors and money market funds will be paid first, covering a further 390,000 accounts and putting a large part of the process behind, he said.
The Savings Deposit Insurance Fund (TMSF), the Justice Ministry and the Central Registry Agency (MKK) are working together and have identified people who profited from market-disrupting activity, Şimşek said.
In the first stage, those with real gains of TL 10 million or more will be approached. If they do not return the money voluntarily, the Justice Ministry will begin legal proceedings.
Authorities also aim to recover assets that were transferred unlawfully to people and companies that benefited from the funds, in case the funds themselves lack enough money, he said. The personal assets of people who acted together will also be pursued.
Limited risk to banks, economy
The risks from the troubled funds have been contained and do not threaten the wider economy, Şimşek said. The problem area has been “quarantined” and direct effects limited, though some indirect effects are possible. “I am not underestimating indirect effects,” he said.
The risk of contagion to banks is very low, he said. Banks’ direct exposure to the risky funds is TL 1.3 billion, against total banking sector assets of about TL 56 trillion, and risky assets make up about 0.09% of the real sector’s total assets, he noted.
Outflows from the funds have largely stopped, Şimşek said. Net outflows total TL 647 billion, about half from foreign investors. Şimşek said most of the money has moved into bank deposits, which have risen by TL 685 billion since Sept. 17.
More regulation planned
The Fund Guide issued in late August was an important step that raised transparency and closed most gaps, but it is “not enough,” Şimşek said.
Further rules are being studied. The minister said sanctions against market manipulation and coordinated trading will be raised significantly, and supervisory institutions will be strengthened. “If necessary, we will transfer some of our tax inspectors to these institutions by law,” he said, adding that the government will also fill any gaps in legislation.
Measures under consideration include independent verification of reported free-float ratios and whether funds sold to retail investors should be open to the electronic fund trading platform TEFAS. Work on permanent reforms was drafted earlier, but the priority is to finish the liquidation first, Şimşek said. The government will consult the industry and weigh the risk of over-regulation.
Şimşek said opening hedge funds to TEFAS in 2019 was a decisive factor in the current problems and that they would not have arisen otherwise.
Türkiye’s $1.8 trillion economy cannot be financed by banks alone, he noted, and at least 30%-40% of financing should come from capital markets, which he said will emerge from this episode healthier. “This area is too valuable to be left to the greedy and the fraudsters,” he said.
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