Economy
Despite shocks, Turkish economic program not shaken: Erdoğan
The structural resilience of the Turkish economy has been strengthened with the program the government is implementing, President Recep Tayyip Erdoğan said on Monday.
He also said that the program “has not been shaken” despite the shocks, while praising the continued growth of the economy at the event in Istanbul.
“Thanks to the program, we have strengthened the structural resilience of our economy. Despite all kinds of shocks experienced, especially in the past three months, the program has not been shaken,” Erdoğan said.
Delivering a speech at the 32nd Ordinary General Assembly of the Turkish Exporters Assembly (TIM) and Export Champions Award Ceremony, the president also said they expected to see inflation figures in the 20s by the end of the year.
Annual inflation in Türkiye eased to 35.4% in May, touching the lowest level since late 2021 amid a continued disinflation period in the face of tight monetary conditions.
“Our reserves are starting to increase again. Confidence in the Turkish lira is increasing. Inflation has been declining uninterruptedly for a year,” he said.
“Inflation in May is at its lowest level in the last three and a half years. We aim to see figures in the 20s by the end of the year,” he added.
Turkish central bank targets inflation to drop to 24% by the end of 2025 with a wider window range between 19% and 29%. The officials have also repeatedly conveyed the aim to see the consumer price index (CPI) in the 20s range.
The data for June, which is due to be announced later this week, is likely to show the rate easing further, according to the latest polls.
Moreover, touching upon exports, Erdoğan said that 2024 was “a record year in terms of exports.”
“We broke a record with $262 billion in exports. The number of companies exporting over $1 billion last year increased to 18. We continue on our path with the same rhythm in 2025,” he continued.
“Our exports increased by 2.7% in May. In the January-May period, goods exports increased by 3.5%. We are also doing quite well in terms of service exports,” he added.
Defense, drone exports
At the same time, he drew attention to medium-high and high-tech product exports as well as the success in the shipments from the defense and aerospace sector.
“The increase in Türkiye’s exports has changed not only in quantity but also in quality. In 2024, medium-high and high-tech product exports exceeded $101 billion. We continue to work to expand our exports,” said Erdoğan.
“In 2024, we provided TL 24.7 billion worth of resources to our companies to support exports of goods and services. Factors such as increasing geopolitical tensions have reminded us once again that we need to boost the geographical diversity of our exports. We aim to lift our exports to distant countries to $50 billion and the share of the Organisation of the Islamic Cooperation (OIC) countries in our total exports to 30% by 2028,” he noted.
“We have managed to become one of the leading countries in armed and unarmed unmanned aerial vehicles (UAVs). Turkish companies produce two out of every three UAVs sold in the world. We have become a global brand in armored land vehicles. God willing, we will achieve the success we have in UAVs in warplanes,” he added.
He also recalled that defense exports reached the volume of $7.1 billion, referring to last year’s figures, which marked a new record for the sector.
As part of his remarks, he also mentioned that the Turkish economy expanded by 3.2% in 2024, also adding that it grew by 2% in the first quarter. “We have achieved uninterrupted growth for 19 quarters,” he said.
Speaking at the same event, Trade Minister Ömer Bolat stated that exports continued to increase despite major challenges.
“In five out of the first six months of the year, we have achieved more goods exports than in the same months of the previous year. We continued to increase in service exports as of the first four months,” he said.
Starting his speech, Bolat recalled that the 2000s, which started with great excitement and hope, were subject to major conflicts and crises such as the world financial crisis, global pandemic, wars and energy wars. He, however, expressed that Türkiye maintained its political stability under the leadership of President Erdoğan despite being in the middle of these crises and the ring of fire, also suggesting that major developments were made in industry, agriculture, services and trade with the reforms in the economy, successes in foreign policy and major projects implemented.
He said that Türkiye’s national income has increased sixfold in dollar terms in the last 22 years, reaching $1.37 trillion and that the national income per capita has increased fourfold, approaching $16,000. Thus, he said Türkiye has risen to the league of high-income countries according to the World Bank.
The minister also said that the annualized exports have reached $265.5 billion as of the end of May.
“Last year, we generated a total of $377 billion in foreign currency. Our president has set a target of at least $390 billion for this year, and with God’s permission, we will complete this by the end of the year,” he maintained.
Top exporters
At the event, the companies that made the highest contribution to Türkiye’s total exports of $377 billion in goods and services last year received their awards.
In services exports, the crown belonged to the flag carrier Turkish Airlines (THY), which was followed by other companies mostly operating in the aviation industry, including Pegasus, Güneş Ekspres Aviation Inc., IGA Airport Operation Inc., and TAV Airports Holding Inc.
The top 10 companies that exported the most goods in 2024 were listed as Ford Automotive, Toyota Automotive Industry Türkiye Inc., Türkiye Petroleum Refineries Inc. (Tüpraş), Kibar Foreign Trade Inc., Star Refinery, TGS Foreign Trade Inc., Oyak-Renault Automobile Factories, Vestel, Arçelik and Baykar Makina.
Moreover, in the e-export category, Trendyol Group ranked first, and was followed by Asır Group Export Inc. and Modanisa Electronic Retailing and Trading Inc.
The event in Istanbul was also attended by Industry and Technology Minister Mehmet Fatih Kacır, Youth and Sports Minister Osman Aşkın Bak and TIM head Müstafa Gültepe.
German flag carrier Lufthansa Group announced on Tuesday it would cancel around 20,000 short-haul flights from its summer schedule through October, as it seeks to curb fuel costs that have surged since the outbreak of the Iran war.
This equates to a savings of around 40,000 tons of kerosene, the price of which has doubled since the start of the conflict, Lufthansa said.
The schedule adjustments reduce the number of “unprofitable short-haul flights” across the Lufthansa Group network, the statement said.
The “planned consolidation of the European network” is being implemented across Lufthansa Group’s six hubs.
The airline aims to optimize its service over the summer through Frankfurt, Munich, Zurich, Vienna, Brussels and Rome, ensuring passengers continue to have access to its global route network.
Lufthansa said that the first 120 daily flight cancellations, effective until the end of May, were implemented on Monday. The passengers concerned have been notified, the airline said.
Flights from Frankfurt to Bydgoszcz and Rzeszow in Poland, as well as Stavanger in Norway, have been temporarily suspended.
Ten routes within the group are to be rerouted via other airports – those affected include Heringsdorf, Cork (Ireland), Gdansk (Poland), Ljubljana (Slovenia), Rijeka (Croatia), Sibiu (Romania), Stuttgart, Trondheim (Norway), Tivat (Montenegro) and Wroclaw (Poland).
In light of the reduced capacity, Lufthansa is also revising its medium-term route planning. Updated flight schedules from June onward are expected to be published in late April and will include further adjustments to the short-haul offering for the summer season.
The group added that its jet fuel supply is secured for the coming weeks and that it is using a combination of physical procurement and price hedging measures to manage the impact of higher fuel costs.
Türkiye’s inflation will be impacted by the recent developments but the downward trend will not change, Treasury and Finance Minister Mehmet Şimşek said on Wednesday.
“There will be no change in the downward trend of inflation; reducing inflation and maintaining that trend is a significant achievement for Türkiye,” Şimşek told an event in Istanbul.
The Iran war sent energy prices soaring, posing a challenge for import-heavy economies like Türkiye, where inflation still eased to 30.87% last month. On Tuesday, U.S. President Donald Trump extended the war cease-fire indefinitely.
Şimşek dismissed calls to ease the fight against inflation, arguing that durable and high growth can only be achieved through low inflation.
“This is a very myopic approach,” he said. “The path to permanent and high growth is through the process of low inflation. If inflation falls, growth will multiply.”
Şimşek stressed what he described as progress made under the government’s economic program, implemented since mid-2023.
Inflation had peaked at 85% in October 2022 before easing to 64% by year-end and standing at around 65% in 2023.
Disinflation began in 2024, bringing it down to 44%, followed by a further decline to 31% last year, he noted.
“It is necessary to ask and reflect on the question: Where would inflation have headed if this program did not exist?”
Şimşek also said the current account deficit was expected to widen further this year due to the oil price shock, but that this was temporary.
Global uncertainty poses risks
Şimşek warned that the global economy is facing an increasingly complex environment marked by geopolitical tensions, fragmented trade and rising debt levels.
In the short-term, he pointed to commodity price shocks driven by the Iran war. Over the longer term, he said the world is entering a “new normal” characterized by persistent geopolitical risks and disruptions in global trade.
“Global trade fragmentation could lead to much more destructive outcomes,” he said, also cautioning that high global debt levels combined with elevated interest rates could pose systemic risks.
He added that weak external demand may weigh on Türkiye’s outlook in 2026, noting that demand dynamics are a more decisive factor than exchange rate movements.
“External demand elasticity is 11 times stronger than exchange rate elasticity. The primary determinant is demand, and unfortunately, as of now, the projections for demand in 2026 are not very positive,” said Şimşek.
Opportunities in defense
Şimşek still said Türkiye sees opportunities in shifting economic dynamics, particularly in the defense sector and supply chain reconfiguration.
He highlighted the rapid expansion of global defense spending, which he said could reach $6.6 trillion, creating significant opportunities for Türkiye’s well-developed defense industry.
“The world is not the old world anymore. A major trend is emerging before us: global defense industry expenditures. Some countries in Europe are spending 5% of their national income on the defense industry. Türkiye sees a major window of opportunity here,” said Şimşek.
“Türkiye has a strong infrastructure in defense industries, and we see this as a major opportunity,” he added.
Türkiye achieved a record of more than $10 billion in defense exports last year and secured $18 billion in new orders.
“Do not underestimate this,” said Şimşek. “The profit margins of $18 billion-$20 billion in defense industry exports are so high that they are equivalent to $50 billion-$60 billion of traditional exports.
“Türkiye is on the threshold of a new industrial revolution, a period where the defense industry serves as a lever.”
Consumer sentiment in Türkiye remained subdued but showed a slight improvement in April, official data from the country’s statistical office showed on Wednesday.
The consumer confidence index edged up to 85.5 from 85.0 in March, Turkish Statistical Institute (TurkStat) said, remaining below the 100 mark that separates optimistic and pessimistic outlook.
Expectations for households’ financial situation over the next 12 months improved, with the corresponding index rising to 87.5 from 85.6, the data revealed.
By contrast, views on the general economic outlook weakened, with that sub-index falling to 78.3 from 79.1.
The survey also showed a more positive assessment of spending on durable goods, with the relevant index increasing to 104.4 from 102.7.
The European Commission unveiled on Wednesday a series of measures to address the impact of surging energy prices on the region’s markets following the U.S.-Israeli war with Iran.
The commission said the measures – announced in a package called “AccelerateEU” – included optimizing the distribution of jet fuel between EU countries, in order to avoid shortages.
“The choices we make today will shape our ability to face the challenges of today and the crises of tomorrow. Our AccelerateEU strategy will bring both immediate and more structural relief measures to European citizens and businesses,” said European Commission President Ursula von der Leyen.
“We must accelerate the shift to homegrown, clean energies. This will give us energy independence and security, and mean we are better able to weather geopolitical storms,” she added.
Here’s how the European Union plans to respond.
Electricity first
Central to the EU proposals is a focus on reducing reliance on oil and gas to cushion against future fossil fuel supply disruptions and price spikes. The commission set out plans on Wednesday to change EU tax rules, to ensure electricity is taxed below natural gas, confirming draft plans previously reported by Reuters.
That aims to incentivize consumers and companies to replace systems running on gas with heat pumps and industrial machinery that runs on electricity.
The proposal will also make it easier for governments to cut energy-intensive industries’ and vulnerable households’ electricity taxes to zero, to curb bills in the near term.
Brussels will make legal proposals to amend the tax rules in May. EU tax rules are politically difficult to change because they require unanimous approval from all 27 member states.
Electricity taxes and levies in the EU are, on average, around twice as high as those for natural gas, according to analysis by think tank Strategic Perspectives.
The commission will also propose an electrification target before summer, to push industries to switch from fossil fuels to electricity.
Oil and gas stocks
The European Commission will coordinate countries’ efforts to fill gas storage in the coming months – including the timing of purchases.
The aim is to avoid price spikes, which could be caused by companies rushing to buy at the same time.
Gas storage is currently 31% full, but the EU requires this to rise to 80% ahead of winter, and companies have been slow to replenish stocks while prices are unusually high.
Brussels will also facilitate possible releases of oil stocks by coordinating the timing and volumes in the EU, the commission said. International Energy Agency (IEA) members – which include most EU countries – agreed last month to release 400 million barrels of oil from their reserves, in a bid to calm oil markets.
Jet fuel
The EU imports about 40% of its jet fuel, of which half comes via the Strait of Hormuz. Airports have warned Europe could face jet fuel shortages within weeks.
The commission will map Europe’s transport fuel supply and stocks and step in to optimise the distribution of fuel to avoid shortages, it said. It will also consider reviewing the EU’s requirement for countries to hold at least 90 days of oil stocks, to include a specific jet fuel requirement.
Brussels will draw up guidance on how to handle potential jet fuel shortages – on issues such as airlines losing airport slots due to cancellations and the EU’s anti-tankering rule, designed to prevent planes from loading extra fuel in cheap locations.
The European Commission will also map Europe’s refining capacity and introduce measures next month to ensure that existing capacity is fully used, it said.
‘Immediate relief’
The EU proposals include a list of recommendations to provide “immediate relief,” although it will be up to individual governments to take them up. They include delaying nuclear power plant closures, financial help to quickly install plug-in batteries and solar panels, and reducing the price of public transport.
State aid
Separately from the proposals published on Wednesday, the EU is preparing plans to let countries subsidize fuel and fertilizer prices more. In a draft of these temporary state aid rules, seen by Reuters, the EU would let governments subsidise up to 50% of fuel or fertilizer price increases companies have paid since the Iran war began.
In a bid to avoid massive, untargeted subsidies straining public budgets, only a few sectors will be eligible – including farming, fishing and road transport. The subsidies must be granted this year.
The draft EU plan would also allow a higher intensity of aid to help industries pay their power bills.
Türkiye’s central bank held its benchmark interest rate unchanged at 37% on Wednesday, maintaining its cautious stance for the second straight month amid pricing pressures due to the Middle East conflict.
In March, the Central Bank of the Republic of Türkiye (CBRT) halted an easing cycle, citing market fallout from the Iran war that it said could affect inflation.
On Wednesday, the bank also left its overnight lending and borrowing rates unchanged at 40% and 35.5%, respectively.
Before the regional conflict began shifting expectations, the CBRT had been expected to continue a rate-cutting cycle that began in late 2024.
The Iran war sent energy prices soaring, posing a challenge for import-heavy economies like Türkiye, where inflation still eased to 30.87% last month. On Tuesday, U.S. President Donald Trump extended the war cease-fire indefinitely.
In a statement following Wednesday’s Monetary Policy Committee (MPC) meeting, the CBRT said the underlying trend of inflation declined in March, while leading indicators suggest a slight increase in April.
The CBRT said energy prices “remain elevated and exhibit notable volatility” amid geopolitical developments and the resulting uncertainties.
“The effects of these developments and domestic energy prices on the inflation outlook through the cost channel and economic activity are being closely monitored,” the statement read.
Indicators point to a slowdown in economic activity, but the bank said “potential second-round effects of recent developments on the inflation outlook will be of importance.”
The tight monetary policy stance, it said, will strengthen the disinflation process through demand, exchange rate and expectation channels.
The cease-fire allowed the central bank “to refrain from tightening,” William Jackson, economist at Capital Economics, said in a note.
“So long as energy prices don’t spike again, we think the CBRT will opt to leave interest rates on hold for at least a few more months,” Jackson said.
The bank said the policy rate would be determined by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets.
“Monetary policy decisions are made prudently on a meeting-by-meeting basis with a focus on the inflation outlook,” the statement said.
The CBRT in February kept its end-2026 interim inflation target at 16% but lifted its forecast range to 15%-21% from 13%-19% previously.
Earlier on Wednesday, Treasury and Finance Minister Mehmet Şimşek said recent developments will impact Turkish inflation but the downward trend will not change.
Şimşek also said the current account deficit was expected to widen further this year due to the oil price shock, but that this was temporary.
The central bank reiterated the policy stance would be tightened in case of a “significant and persistent deterioration” in the inflation outlook, which can also be driven by the recent developments.
“The Committee reiterated that it remains highly attentive to upside risks on inflation,” the bank said.
The CBRT stands ready to support monetary transmission mechanism via additional macroprudential measures in case of unanticipated developments in credit and deposit markets, it added.
“Liquidity conditions will continue to be closely monitored and liquidity management tools will continue to be used effectively.”
Analysts at the Dutch financial giant ING said the rate decision implies an intention to move toward normalization as the bank does not see a need to introduce additional tightening … or to gain additional flexibility by adjusting the upper band of the interest rate corridor.
In the near term, they expect the bank to remain in a wait‑and‑see mode before deciding whether to reduce the effective cost of funding back toward the policy rate.
Türkiye’s stock exchange, Borsa Istanbul, has been accepted as a “Recognised Stock Exchange” by His Majesty’s Revenue and Customs (HMRC), the U.K.’s tax, payments and customs authority, the institution said in a statement on Wednesday.
“Aiming to make our capital markets more visible and accessible, particularly among U.K.-based investors, Borsa Istanbul, with this step, also contributes to efforts to increase foreign investors’ interest in our markets,” it said.
Moreover, with recognition of Borsa Istanbul, “it will be possible for investors resident in the United Kingdom to benefit from tax advantages on their investments in our capital markets,” it added.
“Income earned by holders of Individual Savings Accounts (ISA) from their investments in ‘Recognised Stock Exchanges’ is exempt from taxation in the United Kingdom,” the statement further said.
It also mentioned that lease certificates traded on such recognized exchanges are evaluated under the category of “Alternative Finance Investment Bonds” in the U.K., which it said, “simplifies investors’ decision-making and reporting processes and reduces the compliance burden.”
In addition, it suggested that a “Recognised Stock Exchange” is a designation attributed by His Majesty’s Revenue and Customs “to qualified exchanges that meet certain criteria,” explaining that it means that thereafter it is officially recognized within the scope of U.K. tax legislation.
Borsa Istanbul also provided a list of “Recognised Stock Exchanges,” including major exchanges operating in various countries, such as the “New York Stock Exchange,” “Nasdaq,” “Euronext,” “London Stock Exchange” and others.
Anadolu Agency (AA) reported earlier this month that Turkish authorities were weighing different incentives to draw global investors. The measures come amid ongoing global crises and reportedly include lowering corporate tax for manufacturer-exporters, while also special tax regimes for foreigners are said to be under consideration.
Turkish markets have managed to maintain the positive trend they built at the start of the year during the first quarter and throughout April, despite the conflict between the U.S., Israel and Iran.
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