Economy
Türkiye’s economy logs 3.6% growth in 2025
The Turkish economy expanded 3.4% year-over-year in the fourth quarter of 2025, bringing full-year growth to 3.6%, official data showed on Monday.
Expansion last year was led by the construction sector, with the total value-added increasing by 10.8%, followed by information and communication activities at 8%, the Turkish Statistical Institute (TurkStat) data showed.
The agriculture, forestry and fishing sector contracted by 8.8%.
Fourth-quarter gross domestic product (GDP) rose 0.4% from the previous quarter on a seasonally and calendar-adjusted basis, TurkStat said.
Growth had slowed to 3.3% in 2024 from 5% the previous year.
Economic officials had said they expected last year’s growth to slightly exceed the government’s 3.3% forecast. They expect a supportive global environment to strengthen activity further this year.
In a statement, Treasury and Finance Minister Mehmet Şimşek said increased demand from trading partners and improvements in financial conditions are expected to contribute to growth in 2026, assuming that risks stemming from geopolitical developments are temporary and uncertainties in global trade decrease.
In its three-year economy road map, the government expects the economy to grow by 3.8% this year.
Growth in the third quarter was revised to 3.8% from 3.7%, and second-quarter growth was revised to 4.7% from 4.9%, the data also showed.
Top Turkish economic policymakers convened on Sunday following attacks by Israel and the United States on Iran, assessing the potential impact of the conflict on financial markets, energy prices and the broader macroeconomic outlook.
The joint attacks by the U.S. and Israel started early Saturday and killed Iran’s Supreme Leader Ayatollah Ali Khamenei, with Tehran responding by hitting targets across the region.
Iran has also threatened ships in the Strait of Hormuz, the narrow mouth of the Persian Gulf through which a fifth of all oil traded passes. Several ships have been attacked as well there.
Energy prices rose as a result, sounding an alarm bell for import-heavy Türkiye.
A statement following the Financial Stability Committee meeting chaired by Treasury and Finance Minister Mehmet Şimşek said “all necessary measures are ready and will be implemented decisively when required” to ensure the healthy functioning of markets and to limit possible negative effects.
The statement said the economy remains “significantly” resilient to external shocks, citing strong macroeconomic fundamentals, rising foreign exchange reserves and tight monetary policy.
It also noted that the financial system’s capital structure and liquidity conditions are sufficient to manage potential risks.
Separately, Vice President Cevdet Yılmaz said institutions had already taken precautionary steps against temporary effects stemming from geopolitical developments.
“Our macroeconomic fundamentals are solid. Our economy has proven its resilience against many external shocks in the past,” Yılmaz said in a post on social media.
“Our institutions have taken preemptive measures against temporary effects that may arise from geopolitical developments in our region. Developments will continue to be closely monitored.”
Following the meeting, top institutions, led by the Central Bank of the Republic of Türkiye (CBRT) and the Capital Markets Board (SPK) announced actions to curb market volatility.
The central bank said it would begin Turkish lira-settled forward foreign exchange sales transactions to support the healthy functioning of the foreign exchange market, prevent excessive volatility and stabilize foreign exchange liquidity.
It also decided to suspend the one-week repo auctions “for a period of time.”
The bank started trading on the sell-side of foreign exchange contracts on Borsa Istanbul Stock Exchange’s futures market, two bankers said on Monday.
The Capital Markets Board said it imposed a one-week ban on short selling in the Borsa Istanbul equity market.
In its statement, the regulator said the measures were taken “to limit the possible effects of geopolitical tensions and conflicts in our region on the capital markets.”
The short-selling ban will remain in effect until the close of trading on Friday. The board also allowed a reduction in the minimum equity requirement for margin trading transactions.
Borsa Istanbul Stock Exchange’s main 100 stock index lost 3.8% on Monday, with its main banking index tumbling 6.5%. The Turkish lira slid to 43.97 against the dollar, an all-time low.
Gulf countries are witnessing one of the largest business disruptions since the COVID-19 pandemic, as Iran’s retaliatory strikes have sent shock waves across the usually calm region.
The U.S.-Israeli attacks on Iran and Tehran’s response have forced airport closures, halted port operations and roiled financial markets.
The Iranian attacks landed across every major state in the Gulf, a region that has spent decades building its reputation as one of the world’s most reliable business hubs.
Three people were killed by the attacks in the United Arab Emirates (UAE), and loud explosions were heard for a third day in Dubai and Abu Dhabi on Monday.
The strikes marked an unprecedented escalation for Dubai, whose modern identity was built on being insulated from the region’s conflicts.
From humble beginnings as a small fishing village, the emirate of Dubai used modest oil revenue to build ports, airports and trade centres before pivoting in the 1990s to luxury tourism, real estate and financial services.
“Regionally, the impact across (Gulf) economies is mixed,” said Vijay Valecha, chief investment officer at Century Financial.
“Elevated oil prices provide a fiscal cushion for producers such as Saudi Arabia and Qatar, strengthening revenues and liquidity. However, trade, logistics and tourism, particularly in the UAE, would face pressure if shipping risks rise or regional sentiment weakens.”
Stock markets fall
Gulf stock markets fell sharply when trading opened on Sunday, with Saudi Arabia’s benchmark index dropping more than 4% at the open and closing down 2.2%. Oman closed down 1.4% and Egypt lost 2.5%, both paring earlier losses. Qatar’s index was down 2% in early trading on Monday.
The fresh crisis has rattled global markets. Brent crude rocketed to just over $78 a barrel on Monday, up from a Friday close of $72.87. Asian equities fell broadly, with Japan’s Nikkei down 1.6%, Hong Kong’s Hang Seng losing 1.8% and Taiwan’s benchmark shedding 0.9%.
UAE, whose financial markets don’t trade on Sundays, took the rare step of closing the exchange on Monday and Tuesday. Kuwait was closed on Sunday and suspended trading until further notice.
“Markets will continue to be fragile and volatile as long as the military actions are active,” Mohammed Ali Yasin, chief executive of Ghaf Benefits, a Lunate company in Abu Dhabi, said before news of the market closing.
“Usually in such events, the international institutional investors are the ones that put the selling pressures initially… while local ones try and soften the drops by picking the leading stocks.”
Iran’s strikes targeted airports, military installations, ports and hotels across the Gulf.
Dubai International Airport and Abu Dhabi’s Zayed International Airport both sustained damage, with one civilian killed and 11 injured across the two sites. A berth at Dubai’s Jebel Ali Port also caught fire following an aerial interception.
Some of the UAE’s biggest companies include Dubai developer Emaar Properties and retailer Majid Al Futtaim. The country has also become a magnet for global hedge funds and major banks seeking proximity to vast pools of sovereign wealth managed by ADIA and Mubadala.
Ramadan networking
The disruption comes at a particularly sensitive moment in the Gulf’s business calendar. The attacks fell during the Islamic holy month of Ramadan, when corporate iftars and sahurs, the communal meals that break and begin the daily fast, are among the region’s most important networking events.
Emails seen by Reuters show that gatherings hosted by Dubai carrier Emirates, Abu Dhabi energy company Masdar, Mubadala and education firm GEMS, along with the Department of Government Enablement, have been canceled or postponed.
For a region where relationships underpin business dealings, the loss of Ramadan’s networking season adds a less visible but significant cost to the disruption already unfolding.
Strikes also hit residential areas around Dubai Marina and Palm Jumeirah, setting the Fairmont The Palm hotel ablaze and damaging the Burj Al Arab.
The Fairmont had recently been sold for $325 million to Kuwait’s Arzan Investment Management in a deal seen as a marker of surging Gulf hospitality demand, making the damage one of the starker symbols of the toll on the region’s booming tourism economy.
The U.S., U.K. and European Union issued updated travel advisories for the Gulf following the strikes, urging citizens to avoid non-essential travel.
Key transit airports, including Dubai, Abu Dhabi and Doha in Qatar, were shut or severely restricted on Sunday as much of the region’s airspace remained closed.
Türkiye’s factory activity showed signs of improvement in February as declines in output, employment and inventories eased, while new orders neared stabilization suggesting improving customer demand, a survey showed on Monday.
The Istanbul Chamber of Industry Türkiye Manufacturing Purchasing Managers’ Index (PMI) rose to 49.3 in February, up from 48.1 in January. While still below the 50.0 threshold that indicates growth, the figure is at the highest level since April 2024, when the current period of moderation began.
New orders, a key indicator of demand, slowed by the smallest extent in almost two years. The panel said higher prices were sometimes the cause of an easing of demand.
Inflationary pressures continued to build with both input costs and output prices up sharply during the month, the survey showed. Input costs increased sharply due to new price hikes by suppliers, while a rise in the minimum wage added to staff costs, the panelists’ said.
“Although the latest manufacturing PMI data for Turkey continued to signal moderating business conditions in the sector, there are definite reasons for optimism in the latest figures,” said Andrew Harker, Economics Director at S&P Global Market Intelligence.
“New orders neared stabilization, with a number of firms pointing to signs of improving customer demand. In turn, output slowed to a lesser extent, suggesting that we will see an upturn in official data in the coming months.”
Global oil prices jumped sharply after U.S. and Israeli strikes on Iran, with Brent crude rising about 10% on Sunday as analysts warned prices could spike as high as $100 a barrel after U.S. and Israeli strikes on Iran plunged the Middle East into a new war.
The global oil benchmark has rallied this year and reached $73 a barrel on Friday for its highest since July, buoyed by growing concern over the potential attacks that arrived a day later. Futures trading is closed over the weekend.
“While the military attacks are themselves supportive for oil prices, the key factor here is the closing of the Strait of Hormuz,” said Ajay Parmar, director of energy and refining at ICIS.
Most tanker owners, oil majors and trading houses have suspended crude oil, fuel and liquefied natural gas shipments via the Strait of Hormuz, trade sources said, after Tehran warned ships against moving through the waterway. More than 20% of global oil is moved through the Strait of Hormuz.
“We expect prices to open (after the weekend) much closer to $100 a barrel and perhaps exceed that level if we see a prolonged outage of the Strait,” Parmar said.
Middle East leaders have warned Washington that a war on Iran could lead to oil prices jumping to more than $100 a barrel, said RBC analyst Helima Croft. Rabobank analysts slightly less bullish, seeing prices holding above $90 a barrel in the near term.
The OPEC+ group of oil producers agreed on Sunday to raise output by 206,000 barrels per day (bpd) from April, a modest increase representing less than 0.2% of global demand.
While some alternate infrastructure could be used to bypass the Strait of Hormuz, the net impact from its closure would be a loss of 8 million to 10 million bpd of crude oil supply even after diverting some flows through Saudi Arabia’s East-West pipeline and Abu Dhabi’s pipeline, said Rystad energy economist Jorge Leon.
Rystad expects prices to rise by $20 to about $92 a barrel when trade opens.
The Iran crisis also prompted Asian governments and refiners to assess oil stockpiles and alternative shipping routes and supplies. Kpler analysts said in a webinar on Sunday that India might turn to Russian oil to make up for potential Middle East supply loss.
A top Turkish economy official highlighted on Saturday the progress, results and success in the economic program the government is implementing, citing inflation being at the lowest level in 50 months.
“If we are currently facing the lowest inflation in the past 50 months, this is progress,” Treasury and Finance Minister Mehmet Şimşek told an event in Istanbul.
Annual inflation in Türkiye cooled to 30.65% in January, marking the lowest since late 2021 while month-over-month prices advanced 4.84%, according to official data.
Speaking at the summit organized in Istanbul by Nasıl Bir Ekonomi newspaper, Şimşek shared updates on the disinflation program the authorities have been implementing and pointed out that uncertainties in the global economy have now become the “new normal” as the geopolitical tensions and conflicts have become widespread.
He also cited advancements in artificial intelligence, suggesting that AI and related technologies “will affect almost all areas very rapidly and may have an impact 10 to 100 times faster and broader than previous disruptive technologies.”
However, Şimşek noted that Türkiye is relatively better prepared for geopolitical and geoeconomic fractures and rising protectionism in trade, as nearly two-thirds of its exports go to countries with free trade agreements, and 80%-85% go either to those countries or to nearby regions such as Central Asia, the Middle East, North Africa and the Balkans, where Türkiye has strong ties.
He also emphasized the importance of Türkiye’s transportation corridors and the Middle Corridor, stating that new investments are being made in connectivity through the Development Road Project and that work is ongoing on next-generation trade agreements.
“One of our most critical agenda items right now is next-generation trade agreements that will also include public procurement, services and agriculture,” he said.
Moreover, he suggested that Türkiye posted a $63.5 billion surplus in services trade last year, as he highlighted achievements in sectors such as tourism, health and education.
On inflation, Şimşek recalled that it peaked at 85% in October 2022 and ended that year around 64% to 65%, whereas it now stands around 31%.
“Our target range is 15% to 21%, (as) set by our central bank,” he added.
“The market sees 12-month-ahead inflation at 21% to 22%. This is progress. We are not perfectionists, and we do not want perfectionism to obstruct progress. There is progress, there are results, there is success. If we are currently facing the lowest inflation in the past 50 months, this is progress,” he outlined.
At the same time, he drew attention to financing costs, arguing that they will decline alongside the disinflation program.
“Access to financing will increase. Türkiye will continue to make leaps in production, exports and growth,” he added.
Moreover, reflecting on prices, he said: “Unfortunately, in February, we are also seeing price increases due to Ramadan. While the whole world lowers prices during holidays and special periods, prices rise in Türkiye. This is something worth reflecting on.”
“Since Ramadan fell in March last year, it seems they started increases in January this year and continued in February. But these are not important. Do you know why? Because we will compensate for this in the coming months,” he said.
He similarly said that high rainfall levels in January and February would lead to a productive year in agriculture and food, dismissing the claims that the disinflation process has stalled.
“Just because monthly inflation in January and February was high due to food, to claim that disinflation has stopped and the program is no longer working — I wish those friends good luck,” he noted, referring to claims and analysts’ assesments on recent inflation data.
“We believe we will see a very different picture in three to five months,” he affirmed.
Gold‑loving Turks grew some $300 billion wealthier in the past year as record prices of precious metal swelled the value of their holdings to nearly half the size of the Turkish economy, a recent report indicated.
However, resulting resilience in domestic demand appears to be adding some pressure to the country’s ongoing fight against inflation.
With global bullion soaring to all-time highs since the summer, the total value of Türkiye’s gold stock has climbed to more than $750 billion, a Reuters report said. This is exceptionally high by global standards, considering Türkiye’s gross domestic product (GDP) of about $1.57 trillion.
The central bank says $600 billion of that stock is “under‑the‑mattress,” or “under-the-pillow” in Turkish, referring to gold held by households and companies outside the banking system – reflecting a long tradition of Turks holding tight to the metal as a safe, portable, tangible store of wealth.
The doubling of the value of these coins, bangles and other gold pieces in a year has encouraged spending, despite annual inflation above 30%. Economists and the central bank say this has complicated a disinflation path, prompting slower interest rate cuts.
Still, inflation has regressed notably compared to some 75% in May 2024 and about 85% back in November 2022, and authorities are voicing decisiveness to continue their policies aimed at curbing prices.
Confidence to spend
Gold hit $5,000 an ounce last month, driven by trade disruptions and geopolitical instability.
For Turks, the global gold rush offered some relief after years marked by higher inflation.
“I’ve been investing in physical gold for a year, buying it piece by piece whenever I save up,” said 21-year-old air conditioning technician Furkan as he used cash to buy a gram of gold at an Istanbul shop.
“I believe prices will rise even further. I’m planning to buy a car.”
Türkiye has among the highest levels of household gold ownership alongside India, Germany and Vietnam.
The precious metal, given as gifts at weddings and passed down through generations, is a hedge against inflation and lira depreciation, and a permissible investment under Islamic tradition that spurns interest-bearing banking.
Beyond what is under the pillow, Turkish banks store some $80 billion of the metal in bank deposits and investment funds, while the central bank owns about $80 billion in reserves, data show.
Gold, in particular, has helped the Central Bank of the Republic of Türkiye (CBRT) to accumulate holdings valued above $200 billion for the first time in recent months.
Central bank slowed rate cuts
In a recent blog post, the central bank flagged that housing prices have risen markedly more in provinces with a higher share of gold deposits than elsewhere since the last quarter of 2023, when global bullion prices started to climb.
When households use gold-related wealth to buy homes without relying on credit, “demand remains strong even amid tight financial conditions,” it said, calling this a “clear sign of a wealth effect.”
Asim Gürsel, a gold shop owner in Istanbul, said that over the past year, customers were increasingly selling gold to buy cars or first homes in a reversal from past practices when they were largely selling homes to buy gold.
The central bank cut its key rate by a smaller-than-expected 100 basis points to 37% in January, when monthly consumer prices soared nearly 5%, and it has since slightly revised year-end inflation forecasts upward.
Gold prices jumped almost 25% in January alone, when the wealth effect in Türkiye amounted to $80 billion, capping a year in which it totaled $300 billion, according to Reuters calculations.
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