Türkiye

Tight policy, timid growth, lower inflation

Along with the accelerating disinflationary process, the Turkish economy is poised for a slower but more balanced growth trajectory. This year and into 2026, the contribution of private consumption (approximately 55% of GDP) to growth will remain limited due to durably tight monetary policy. The central bank is expected to gradually start cutting its one week repo rate (46%) in July 2025 to reach 30% by mid-2026, in line with disinflation. Inflation will continue to strain household budgets, particularly among people in the lower- and middle-income brackets. Accordingly, the contribution of private consumption to growth will mostly rely on the upper income group. On the state side, the tighter fiscal policy, involving spending cuts (excluding reconstruction in the wake of the two earthquakes in 2023), will reduce the public-sector contribution to growth (approximately 12% of GDP). Private investment (approximately 10% of GDP), also weakened by elevated financial costs, is expected to show gradual improvement from the second half of 2025. Net exports will continue to be a drag on growth, albeit to a lesser extent thanks primarily to lower global energy prices, the restriction on gold imports, and higher tourism revenues in 2026 (estimated at USD 70 billion, up 8% from 2025). The performance of goods exports will be influenced by a recovery in EU demand, particularly in Germany, and the fate of the US economy. Should these factors be positive in 2026, it could trigger a recovery in industrial production, which grew by a meagre 1.3% year-on-year in the January-April 2025 period. Exports of the Turkish defence industry and related technological software will definitely improve their recent high growth profile.

The Turkish lira will continue to appreciate in real terms in 2026, although at a slower pace, and thereby support the disinflation process. Annual inflation is projected to decline further to nearly 26% by year-end. That said, it will remain significantly above the central bank's forecast of 12%. Barring an unexpected exchange-rate shock, this should drive disinflation by slowing the rise in imported basic goods prices. The breakdown of the price inertia in services and the improvement in inflation expectations will support the trend.

Narrowing external deficit, fiscal consolidation to continue

The gap in the income balance due to the repatriation of revenues by foreign investors, and the surplus in the services balance will continue in 2026. The narrowing of the foreign trade deficit will again reduce the current account deficit as a percentage of GDP. Tourism and transportation revenues are expected to be among the most important contributors to the services surplus. Relatively low global energy prices will support a decline in the import bill, while the pace of export growth will depend mostly on a recovery in European economies. Two risk factors subsist in this context. First, a potential decline in global trade volumes caused by the Trump administration’s unpredictable tariff policy could weaken demand for Turkish export goods. Second, regional geopolitical developments could force the closure of key transport routes, potentially driving up commodity import prices. The closure of major transit routes (e.g., the Strait of Hormuz), not to mention damage inflicted on oil production facilities, would dramatically increase energy prices..

In June 2025, the central bank’s gross international reserves amounted to USD 156 billion (representing around 85% of short-term external debt stock, or slightly more than half in gold) from USD 98.5 billion in May 2023. In 2024 and 2025, the moderation in domestic demand caused by the official monthly cap on credit growth (between 1.5 and 2%) has helped narrow the current account deficit and has increased the central bank's international reserves. The growth in reserves triggered a decrease in the risk premium – the 5-year USD CDS fell to 285 points in June 2025 vs. 888 points in July 2022. This has enhanced the country's ability to attract foreign capital inflows. However, reliance on short-term inflows to support the increase in reserves presents a challenge for the central bank to maintain Turkish lira stability in the face of potential external and domestic pressures.

Fiscal consolidation will continue to be driven by reduced expenditure, mainly related to discretionary spending (i.e., operational expenses, support for local projects etc). The slowdown in inflation will facilitate a deceleration in the growth of personnel expenditures, which constitute 30% of the total. However, interest payments, which rose 75% over January-May 2025 versus the year-earlier level, are expected to remain high. On back of increased inflation and the tightening of monetary policy, the average cost of domestic borrowing rose to 47% in May 2025, compared with 35% in May 2024.

Regional geopolitical tensions will be a marker in foreign policy

Türkiye has a presidential system that was passed by referendum in 2017. Executive powers and duties are exercised and fulfilled by the President. The 2023 general elections were won by President Recep Tayyip Erdo?an and his Justice and Development Party (AK Parti). The domestic political landscape is expected to remain relatively stable.

Türkiye’s foreign policy has been primarily driven by economic considerations in recent years. Geopolitical tensions, particularly in the Middle East, are expected to play a more significant role from 2025. The country is expected to proceed with caution to avoid being drawn into the conflicts. Although it is not implicated in the conflict involving Iran, Israel and the US, Türkiye nonetheless faces significant risks. While Ankara maintains diplomatic and commercial ties with Tehran, a broader conflict could destabilise Türkiye’s south-eastern borders, due to the presence of Iran-backed groups in Iraq and Syria. Türkiye could also have to deal again with refugee inflows from neighbouring countries. Türkiye will continue to serve as a pivotal diplomatic mediator, as is the case with the ongoing talks between Ethiopia and Somalia, and with negotiations between Ukraine and Russia.

Türkiye has expanded its footprint in Africa, investing in infrastructure, energy, and telecommunications. It has established robust economic ties with African nations, positioning itself as a crucial partner: trade between Africa and Türkiye rose from USD 5 billion in 2003 to USD 33 billion in 2024. Türkiye, while a NATO member, seeks to maintain a degree of strategic autonomy, as seen in Syria, Libya and the Caucasus. Its relationship with the EU continues to be complex – on the table are frozen accession talks, the Cyprus issue and tensions with Greece – although both sides remain bound by their shared interests.

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: June 2025