Türkiye

Growth to improve amid gradual disinflation

The underlying growth profile should remain relatively subdued in the Turkish economy for the remainder of 2026, reflecting tight financial conditions (limited loan growth, elevated real interest rates) and softer external demand. Private consumption (around 55% of GDP) is likely to remain slack in the near term as high borrowing costs, slower real credit growth (around 25% as at July 2026 vs. annual inflation of 31.8%) and the cumulative erosion of household purchasing power all curb discretionary spending. Nevertheless, a relative rise in real wages and the gradual decline in inflation should prevent a more pronounced weakness in household demand. Investments (around 30% of GDP) are also likely to remain uneven: high financing costs, weaker profitability, and uncertainty over the demand outlook should continue to weigh on private sector investments, particularly for smaller firms while machinery, automation and productivity enhancing investments by larger corporates should prove more resilient. As monetary policy is expected to become progressively looser and disinflation improves household purchasing power, domestic demand conditions are set to improve in 2027. Private consumption should therefore regain momentum while lower financing costs and improving business confidence should support a broader recovery in investments. The normalisation in domestic demand, potentially reinforced by a more supportive fiscal stance ahead of the electoral cycle (which is scheduled for 2028 but expected to be held sometime in 2027), should drive accelerated growth. However, resulting stronger demand could further complicate the final stage of the disinflation process.

At the sectoral level, the automotive industry is expected to remain relatively resilient, supported by exports and integration into European supply chains. Activity is projected to pick up gradually in 2027 as financing conditions ease and domestic demand recovers. The textile and clothing sectors are likely to remain under pressure due to high labour costs and competition from lower-cost producers. However, conditions may stabilise in 2027, particularly in higher value-added segments. Tourism is expected to remain relatively strong despite the geopolitical uncertainty and weaker price competitiveness. The outlook for the sector should improve further in 2027 provided that regional tensions ease.

The disinflation trend is expected to continue but at a relatively gradual pace. The improvement will initially be associated with weaker demand, tight credit policy and a favourable base effect while services inflation (particularly rents and other backward-looking components such as education) is likely to be considerably stickier than goods inflation. At the same time, the inflation outlook remains exposed to significant upside risks from energy and food prices, geopolitical developments and exchange-rate pass-through. Against this backdrop, we expect the central bank to maintain a cautious, data-dependent easing cycle, prioritising the preservation of sufficiently high real rates rather than pursuing rapid nominal rate cuts. Scope for monetary easing should increase further in 2027 as headline and underlying inflation are set to moderate. However, with economic activity likely to strengthen and fiscal policy potentially more supportive ahead of the elections, the central bank will need to carefully calibrate the pace of cuts to prevent an early recovery in credit and consumption from undermining the disinflation process.

Possible minor easing in fiscal policy ahead of elections, plus narrower external deficit

Türkiye’s fiscal position is expected to gradually improve although the adjustment is unlikely to be linear. The normalisation of earthquake-related reconstruction spending (estimated at around USD 91 billion between 2023-2025), continued strength in nominal tax revenues (up 40% YoY in the January-July 2026 period) and greater expenditure discipline should support fiscal consolidation. At the same time, elevated interest expenditures (around 15% of total expenditures), public sector wage and pension adjustments, and other social spending commitments are likely to slow the pace of improvements. As inflation moderates, the support to nominal tax revenues from high inflation will gradually shrink, making tighter control over recurrent government spending and improvements in expenditure efficiency increasingly important to enable sustained fiscal consolidation. In addition, fiscal policy may become less restrictive as the elections approach, with presidential and parliamentary elections currently scheduled for 2028, or possibly earlier. Overall, the relatively low and stable public debt burden provides an important buffer and leaves Türkiye in a comparatively favourable position among emerging-market economies. However, as monetary policy is expected to ease and domestic demand recover, maintaining a sufficiently restrictive fiscal stance will be important, particularly to ensure that fiscal policy does thwart the disinflation process.

The external balance is expected to remain stronger than in earlier periods of domestic demand-led growth. Tighter financial conditions and the still-moderate pace of private consumption are expected to continue acting as a brake on import demand in the near term, while tourism (10% of GDP) and other services revenues provide an important source of foreign-exchange earnings. The energy balance (net energy imports stood around 3% of GDP in 2025) will remain an important determinant of the outlook, leaving the current account sensitive to developments in global oil and natural gas prices. In the wake of disinflation and monetary policy easing, the recovery in private consumption and investment is expected to generate stronger demand for imports of consumer goods and equipment, which respectively accounted for 18% and 15% of total imports in 2025. Nevertheless, continued export growth, tourism and a more balanced composition of growth (less credit-intensive and import-oriented) should allow the current account position to further improve despite the acceleration in economic activity. This would represent an important qualitative improvement in Türkiye’s growth profile by reducing its external financing requirement and vulnerability to shifts in global risk appetite. The durability of this adjustment will ultimately depend on maintaining competitiveness and increasing the share of longer-term financing, particularly foreign direct investment, while continued international reserve accumulation would provide an additional buffer against external shocks. The improvement in the current account should facilitate this accumulation. The trend is already evident, with total international reserves climbing to USD 178.4 billion (around 110% of Türkiye’s short-term external debt stock) and net reserves excluding swaps reaching USD 50.6 billion as at August 2026, primarily driven by fresh foreign exchange purchases by the central bank and higher global gold valuations.

Rising diplomatic role in a fragile region, domestic attention focused on elections

Türkiye’s geopolitical position presents both significant opportunities and risks. Its strategic location, NATO membership and economic ties with Africa, Central Asia, Europe and the Middle East have bolstered its importance amid growing global fragmentation. Improved relations with the EU—which would involve, in particular, progress in modernising the customs union (agriculture and services are excluded, but Türkiye must align itself with the EU’s free trade agreements) and strengthened cooperation in defence and the industrial sector—would boost exports and foreign direct investment. Türkiye’s ability to maintain good relations with the US, the EU, Russia, Ukraine and the Gulf states has enhanced its role as a regional hub in the areas of trade, energy and diplomacy. At the same time, its immediate neighbours pose a major geopolitical risk. Stabilisation and reconstruction in Syria could create opportunities for Turkish companies in the construction, trade and infrastructure sectors. However, a resurgence of regional tensions could increase instability. A prolonged and widespread conflict, leading to disruption of regional energy flows, would be particularly detrimental to Türkiye due to rising energy import costs, a slowdown in tourism, a widening current account deficit, a spike in inflation and currency pressures.

Domestic political developments are likely to continue to be an important source of uncertainty in 2026-2027, particularly as attention will gradually shift towards the next presidential and parliamentary elections, currently scheduled for 2028. However, an earlier vote cannot be ruled out. Such a decision would require a three-fifths parliamentary majority, meaning that the governing alliance would need support from outside its existing parliamentary bloc.

Payment

Traditional credit payment instruments are still in common use in Turkey’s domestic market, as they often serve as negotiable instruments. This is the case for promissory notes, a solution regularly used by SMEs for commercial transactions. Similarly, post-dated cheques serve as both a title of payment and a credit instrument. Cheques circulate in the domestic market as negotiable instruments until their maturity date. An amendment, which came into effect on the July 15, 2016, imposes a punitive fine on the person responsible for a “dishonoured cheque”. If the fine is not paid, the punitive measure can be transformed into a prison sentence of up to 1,500 days. In such cases, neither settlement nor prepayment are executed. In addition, the drawer of a dishonoured cheque is subsequently banned from drawing cheques or opening cheque accounts. After payment of cheque amount or ten years of the court decision, a ban shall be removed. Although banks are now required to exercise greater vigilance with regard to the profiles of their clients, the law concerning cheques, which came into force in December 2009 provides for large financial sanctions, which are payable by the drawer of the cheque in cases of non-payment.

The SWIFT electronic network is well-established in Turkish banking circles and constitutes the most commonly used instrument for international payments.

Debt Collection

AMICABLE PHASE

Amicable procedures, which involve the sending of a formal notice to pay, followed by repeated telephone calls, remain a relatively effective method. On-site visits can also pave the way for restoring communications between suppliers and customers, thereby enhancing the chances of completing successful negotiations. The civil procedure code specifically states that the judge may at any time during legal action encourage the amicable settlement of the dispute, provided that it results from a real desire by the parties to seek an out-of-court settlement via a negotiated transaction.

The Law on Mediation in Civil Disputes stipulates that mediation shall be applied only in the resolution of private law conflicts arising from acts or transactions of interested parties who have the capacity to settle such conflicts. The parties are free to apply to a mediator at any time, in order to continue, finalise or abandon the process.

Depending on the debtor’s solvency, the terms of the transaction can range from payment in full, to repayment by instalments, to a partial payment as final settlement. In the absence of a voluntary settlement, the threat of a bankruptcy petition (iflâs) is a frequently employed tactic to elicit a response from the debtor and prompt them to pay the arrears.

Legal proceedings

Debt execution procedure – via an Administrative Body

 Negotiable instruments, such as bills of exchange, promissory notes and cheques, enable creditors (without obtaining a prior ruling) to directly approach the enforcement office (Icra Dairesi) for serving the debtor with an injunction to pay. They can then, if necessary, proceed with the seizure of the debtor’s assets. Seizure is a process that begins with filling an order for payment, which is then served to the debtor. If there are no objections to the order, the assets of the debtor are liquidated to cover the claims. If the order is not accepted by the debtor, he has the possibility to request that the creditor proves the claim in court. The debtor has ten days to settle the arrears in question, or five days to approach the enforcement court and oppose payment on grounds that, for example, the signature on the document is not his own, or that the debt no longer exists.

If the creditor decides to serve the debtor with an injunction to pay despite the fact that it does not hold negotiable instruments, such as bills of exchange, promissory notes and cheques, the debtor can object to the injunction to pay in 7 days after receiving it. This objection suspends the enforcement proceedings until the creditor files and wins an action for annulment of objection suit regarding its claim. With the regulation that came into force on 1.1.2019 applying to the mediator became a precondition for the cases that are filed against the claims for the payment of a certain amount of money and compensation. Therefore, in order for the creditor to file the action for annulment of objection suit to resume the execution process it first has to apply to the mediator.

If the opposition is deemed to be abusive, the debtor is liable to large penalties.

Litigation procedure – examined by the Court

If the pre-legal procedures for the collection of the debt from the partner/supplier fail, a lawsuit can be brought against the debtor before commercial courts. The commercial court (asliye ticaret mahkemeleri), which is a specialised chamber of the court of first instance, is competent to hear commercial disputes and insolvency proceedings. In cases where the validity of the claim is disputed, the only recourse is to initiate ordinary proceedings, via a summons, to appear in court.

If Turkey has not signed a bilateral treaty or a reciprocity treaty with the plaintiff’s country, the plaintiff is required to put up a surety bond, judicatum solvi, with the competent local court. This amount represents approximately 15% of the claim. The same pertains to Turkish applicants with no permanent residence in Turkey. At the end of the litigation procedure, the security deposit is refunded to the creditor by the court.

The plaintiff is also obliged to put up one quarter of the court fees, which are proportional to the amount of the claim, at the commencement of the proceedings. In addition, notarised documents must be presented to the court.

Ordinary proceedings are organised into three phases. The first involves position statements from each party (a statement of claim and a statement of defence). In the second and lengthier phase, the court investigates the case and examines the relevance of the evidence submitted, to see whether it is conclusive or discretionary evidence. Finally, in the main hearing that constitutes the third phase, the court hears both parties and their lawyers before issuing a ruling.

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Enforcement of a Legal Decision

Any legal decision can be fulfilled via enforcement and bankruptcy offices/officers, if the person who is ruled against, does not performs legal decision voluntarily on time. Enforcement differs slightly depending on the type of debt, but it generally resembles the Debt Execution Procedure. However, in contrast with the Debt Execution Procedure, the objection to the enforcement of a legal decision is an exceptional situation.

Insolvency Proceedings

COMPOSITION

The debtor subject to bankruptcy can apply for a proposal of composition agreement (konkordato projesi). If the proposal appears to the commercial court to be viable, the court imposes a moratorium and appoints a composition commissioner (konkordato komiseri) to examine the debtor’s affairs. The most common form of proposal is for a total or partial repayment over a period of time. However, a proposal may also take the form of an assignment of all or part of the debtor’s assets in satisfaction of creditors’ claims.  If the proposal is not approved, a bankruptcy order may be rendered.

REORGANISATION

The debtor will designate some or all of its assets for its creditors, propose that those assets are sold (or transfer to third parties), and that the proceeds of the sale should be distributed to creditors. A debtor wishing to restructure (or a creditor having the right to institute bankruptcy proceedings) may apply to the competent execution court with a reorganisation project. If the execution court determines that the project is likely to be successful, it will order a creditors’ meeting to decide whether they accept the reorganisation project. If approved, the project will then be submitted to the court for approval. If the court determines that reorganisation will be more lucrative than bankruptcy, it will approve the project.

RESTRUCTURING

A debtor company facing financial difficulty or imminent risk of insolvency has the right to apply to the commercial court for approval of a restructuring project previously approved by the required quorum of creditors affected by it (impaired creditors).

The new EBC (Enforcement and Bankruptcy Code) provisions encourage the debtor and its creditor to reach a voluntary arrangement to rehabilitate the distressed but still viable business. The contents of the proposal enter into force after acceptance by the creditors and approval of the court. However, creditors have the right to apply to the court for relief if the debtor does not fulfil its obligations under the project. The court has a right to declare the debtor bankrupt following any non-compliance. Restructuring is only available for companies and co-operatives with the exception of banks and insurance companies.

BANKRUPTCY

Ordinary bankruptcy

The creditor begins this form of proceeding by requesting the execution office to serve on the debtor an order to pay for a due debt. The debtor has seven days after service in which to dispute the debt or pay. If the debtor fails to pay or dispute the debt, the creditor may apply to the commercial court for a bankruptcy order, which the court will generally grant.

Last updated: 20/082026