Levent Gürses
Following the Ankara Regional Court of Appeal’s 36th Civil Chamber’s decision to annul the CHP’s 38th Ordinary Congress in 2023, at which Özgür Özel was elected as party leader, and to reinstate former CHP leader Kemal Kılıçdaroğlu to office whilst provisionally removing Özel and the party leadership from their posts, the markets experienced sharp fluctuations. On Thursday, 22 May, the stock market plummeted following the ruling of absolute nullity. The BIST 100 index of the Istanbul Stock Exchange closed the day down 6.05 per cent at 13,163.88 points.
The sharpest decline by sector was seen in the banking index. The BIST Banking Index fell by 8.63 per cent to 14,947 points. The decline in Akbank and Yapı Kredi shares exceeded 9.90 per cent, approaching the floor price. Selling pressure also intensified in holding company shares. The highest trading volume was recorded in Turkish Airlines and ASTOR shares.
Public banks sold 6 billion dollars to curb the currency
It was not just the stock market; there were also significant movements in the foreign exchange markets. To prevent currency prices from rising despite the demand, interventions worth billions of dollars were made. Bloomberg reported that, immediately following the decision, Turkish public banks sold approximately 6 billion dollars into the market to limit the lira’s depreciation. The report stated, based on information from investors familiar with the transactions, that approximately half of the sales took place following the court ruling.
Investors reported that the intensity of foreign exchange sales in the first few hours had eased during the day, but that a rather sharp intervention had been carried out initially. Market participants assess that public banks increased their supply of foreign exchange as pressure on the lira intensified.
Turkey’s risk premium rose by 19 basis points
The decision also triggered movements in indicators reflecting Turkey’s external borrowing costs. Turkey’s 5-year credit default swap (CDS), known as the risk premium, rose by 19 basis points to 260 basis points. The yield on Turkey’s 5-year dollar-denominated eurobonds rose by 24 basis points to 6.87 per cent.
The week’s key developments were as follows:
Budget funds allocated to interest far exceed spending on education and healthcare
The budget was increasingly crushed under the weight of interest payments in the first four months of the year. Between January and April, the budget recorded a deficit of 758.8 billion TL, with 26 out of every 100 liras of tax revenue going towards interest payments. Interest payments once again exceeded social spending. Havva Gümüşkaya of Birgün newspaper calculated the burden of interest expenditure on the budget.
In April, central government budget expenditure stood at 1 trillion 524.9 billion TL, whilst budget revenue amounted to 1 trillion 186.2 billion TL. In April, the budget deficit stood at 338.7 billion TL, with 257.6 billion TL of funds channelled towards interest expenditure.
In the first four months of the year, central government budget expenditure totalled 5 trillion 950.3 billion TL, while budget revenue stood at 5 trillion 191.5 billion TL, resulting in a budget deficit of 758.8 billion TL. The amount allocated to interest expenditure during this period was 1 trillion 133.7 billion lira. Consequently, an average of 9.45 billion TL was spent daily on interest expenditure over the first four months.
The funds allocated to interest outstripped public expenditure on social and public services. As of April, expenditure of 475.1 billion TL on health services, 658.8 billion TL on education services, and 526.9 billion TL on social security and social assistance all fell short of the 1 trillion 133.7 billion TL transferred to interest payments.
OECD: The tax balance has been severely disrupted; wage earners are constantly losing out
According to the OECD’s 2026 Report on the Taxation of Wages, the tax burden on wages in the country has increased. The tax burden on the wages of those living on their labour remains above the OECD average. The total tax wedge—which represents the tax burden on the wages of a single worker earning the average wage—stood at 40.3 per cent in 2025. This figure was 0.76 percentage points lower in 2024. Across the OECD, the tax wedge for a single, childless worker was calculated at an average of 35.1 per cent.
According to Birgün’s analysis, based on OECD data, the share of tax revenues in Turkey’s Gross Domestic Product (GDP) rose to 24 per cent, reaching a four-year high. Turkey’s total tax burden is below the OECD average of 34 per cent; however, indirect taxes such as VAT and excise duties—which symbolise tax fairness—accounted for 62.2 per cent of total revenue, significantly outpacing the OECD average of 45.3 per cent. The OECD revealed that the corporate tax rate, which stood at 16.1 per cent in 2022, has fallen to 8.6 per cent.
Wage data: We are at the bottom of the table in Europe by a significant margin
According to a report analysing wages across OECD countries, Turkey ranked last in terms of average annual gross wages, whilst Switzerland took first place, with a difference of approximately 89,000 euros compared to Turkey.
While the average annual gross wage in Switzerland is 107,487 euros, the average annual gross wage in Turkey stands at 18,590 euros. The wage gap between Turkey and Switzerland was calculated at 88,897 euros.
Germany and the UK, considered among Europe’s largest economies, ranked 7th and 8th, respectively. The average annual gross salary in Germany was measured at 66,700 euros, whilst in the UK it was measured at 65,340 euros.
In the Central Bank survey, the inflation expectation rose to 28.94%.
The Central Bank published its survey of market participants for May. The expected increase in the Consumer Price Index (CPI) for May, which stood at 1.82% last month, rose to 1.89% in this survey period. The expected CPI increase for the end of the current year rose from 27.53% to 28.94%.
The CPI increase forecast for 12 months ahead rose from 23.39% to 23.82%, whilst the forecast for 24 months ahead rose from 18.02% to 18.43%.
The year-end USD/TL exchange rate forecast rose from 51.2285 to 51.5711, whilst the 12-month-ahead USD/TL forecast rose from 53.6195 to 54.6923. The year-end current account deficit forecast, which stood at 44.3 billion dollars in the previous survey period, rose to 47.8 billion dollars in this period, whilst the forecast for next year increased from 39.8 billion dollars to 41.6 billion dollars. The forecast for Gross Domestic Product (GDP) growth fell from 3.5% to 3.3%, whilst the forecast for next year remained steady at 4.1%.
In the survey, the forecast for the Central Bank of the Republic of Turkey’s (TCMB) policy rate at the first meeting was 37%, at the second meeting 37%, and at the third meeting 35.99%. The policy rate expectation for 12 months ahead, however, rose to 30.22 per cent.
Year-end USD/TRY forecast from a major bank
UK-based HSBC has revised its year-end USD/TRY forecast upwards, raising it from 48 to 50. The reasons cited for the update were persistently high inflation and a widening current account deficit. According to a report in Ekonomim newspaper, the bank noted that the strong inflation outlook in the first four months is increasing pressure on the current exchange rate policy.
According to the report, the 14.6 per cent rise in inflation in the first four months of 2026 is placing significant pressure on the current exchange rate policy.
Poverty line reaches 35,000 lira
The United Metal Workers’ Union Class Research Centre (BİSAM) has released poverty and subsistence level data for May 2026; the poverty line has reached 35,000 lira, with daily food costs amounting to 1,160 lira.
According to the calculations, the monthly food expenditure for a four-person household amounts to 34,808 TL, whilst the total poverty line stands at 114,348 TL.
Real unemployment has risen, and employment has fallen
TÜİK has released the Labour Force Statistics for the first quarter of 2026. The rate of underutilised labour force—defined as actual unemployment—rose to 30.4 per cent, whilst the number of employed individuals fell by 301,000. In the first quarter of the year, the seasonally adjusted unemployment rate stood at 8.2 per cent.
The number of employed persons fell by 301,000 compared to the previous quarter to 32,221,000 in the first quarter of 2026, whilst the employment rate fell by 0.5 percentage points to 48.3%. This rate stood at 65.7% for men and 31.3% for women. The labour force decreased by 353,000 people compared to the previous quarter, reaching 35,116,000 in the first quarter of 2026, whilst the labour force participation rate fell by 0.7 percentage points to 52.6%. The labour force participation rate stood at 70.5% for men and 35.2% for women.
The unemployment rate among the young population aged 15–24 remained unchanged from the previous quarter at 15.2%. Within this age group, the unemployment rate was estimated at 12.6% for men and 20.4% for women.
According to Karahan, the cause of the crisis is ‘consumption appetite’
The Central Bank shared the section on inflation from Governor Fatih Karahan’s remarks in the Inflation Report 2026-II via its social media account. Karahan noted that whilst the cost of the disinflation process is occasionally debated, the cost of inflation is far higher. Noting that savings have fallen in a high-inflation environment, Karahan again pointed to the public, attributing the crisis to ‘appetite for consumption’.
Highlighting that high inflation leads to distortions in income distribution, Karahan stated that in a high-inflation environment, savings remain “under the mattress”, dollarisation increases, and this weakens the strength of the financial system. He noted that this situation negatively affects Central Bank reserves and makes the economy more vulnerable to external shocks.
The figures for the fight against poverty are constantly rising
Expenditure under the “Fight Against Poverty” budget line reached a peak as of April 2026. The total funds utilised from the central government budget for the fight against poverty during January, February, March and April 2026 amounted to 145 billion 25 million TL.
According to a report by Mustafa Bildircin in the Birgün newspaper, the economic crisis, which is deepening day by day, has left tens of millions of citizens in need of social assistance. In 2025, as the economic crisis deepened, public expenditure under the heading of “Combating Poverty” amounted to 359 billion 184 million TL. In 2024, the figure stood at 166 billion 378 million TL. In the first four months of this year, the figure has already reached 145 billion 25 million TL.
Scope of asset amnesty expanded despite expectations of a rollback
The scope of the asset amnesty under discussion in Parliament has been expanded. Consequently, venture capital investment funds have also been included within the scope of the asset amnesty. Venture capital investment funds were included in the regulation following a last-minute proposal by the AKP. This paves the way for assets of known origin to be assessed not only in areas such as banks and government bonds, but also within venture capital investment funds. The public and MPs had reacted against the inflow of funds of questionable origin into the country.
With the tax regulation passed by the Grand National Assembly of Turkey and enacted into law, the “asset amnesty” scheme has been extended until 31 July 2027, and the instalment period for Social Security Institution (SGK) and public debts has been increased to 72 months.
Fines budget swells, annual traffic fine target exceeded in four months
With 78.5 billion lira in traffic fines issued in four months, the annual target has been exceeded. 26.8 billion lira of these traffic fines has been collected. Of every 100 lira in fines paid into the Treasury between January and April, 29 came from traffic fines. The collection rate for tax fines remained at 6.7 per cent.
‘Towards a more fragile and impoverished equilibrium…’
In her article titled “With the energy shock, the Emperor has no clothes!”, Birgün newspaper columnist Güldem Atbay emphasised that Turkey is no longer merely an economy suffering from high inflation but has also lost its direction, stating: “The external balance disrupted by the energy shock, the growing budget deficit, the pressure of high interest rates and the strained industrial structure tell us one thing: The current economic management is dragging Turkey not towards a better balance, but towards a more fragile and poorer one,‘ she said.
Atbay added, ’Oil prices settling above $100 mean, for Turkey, a widening current account deficit, a growing budget deficit, a resurgence of inflationary pressure, and a strained Turkish Lira policy. Indeed, the current account balance has already sounded the alarm. Whilst the 12-month current account deficit is approaching $40 billion once again, there is also a serious deterioration in the core balance excluding energy and gold. This is highly critical. Because the problem is not merely expensive energy; it is the production structure’s dependence on imports and the weakness in the economy’s capacity to generate foreign exchange. In other words, even if the Turkish economy does not grow, it is generating a foreign exchange deficit. More importantly, this deficit is being financed through highly fragile channels. As foreign capital outflows accelerate, reserves are once again dwindling. When geopolitical risks rise, the fragility of an economy reliant on hot money becomes all too apparent,” he wrote.
Brent crude, which had risen above $110, eased towards the weekend
Oil prices are fluctuating in line with developments regarding the Iran conflict. US Secretary of State Marco Rubio noted that there were ‘some encouraging signs’ regarding a potential agreement with Iran, stating that Iranian officials were reviewing Washington’s latest offer and that Pakistani mediators were expected to visit Tehran. This had caused Brent crude, which had risen to $112 a barrel at the start of the week, to fall to $102.60 on Thursday.
However, following this 4 per cent drop, on Friday morning, reports that Iran’s Supreme Leader had ordered the country’s enriched uranium reserves to remain within Iran caused Brent crude futures to rise towards $104 per barrel on Friday.
The Strait of Hormuz has become the most critical point in the global economy
This situation has complicated the ongoing peace talks, as the dismantling of Tehran’s nuclear programme is one of the US’s key demands. It is also reported that Iran is working with Oman on a framework for a permanent transit fee system that would formalise its control over maritime traffic passing through the Strait of Hormuz. However, President Donald Trump rejected this proposal, insisting that the waterway must remain open, free and toll-free.
Another development increasing pressure in the region was the blockade imposed by the US Navy on Iranian ports. As a result, Iran’s Hark Island oil terminal has been out of operation for at least 10 days. This situation has cut into Tehran’s oil revenues whilst leading to the withdrawal of millions of barrels of oil from the market.
Both production and exports in the automotive sector have declined
According to data from the Automotive Industry Association (OSD), total automotive production in the first four months of the year fell by 3 per cent compared to the same period last year, reaching 448,428 units. Car production, meanwhile, fell by 15 per cent to 250,276. Including tractor production, total production reached 455,526. During the January–April period, production in the commercial vehicle segment increased by 17 per cent compared to the same period last year, by 20 per cent in the heavy commercial vehicle segment, and by 17 per cent in the light commercial vehicle segment.
Automotive exports also fell by 9 per cent in unit terms over the four-month period compared to the same period last year, recording 300,718 units. According to data from the Uludağ Automotive Industry Exporters’ Association, car exports fell by 3 per cent to $3.5 billion during the same period.
The story of how rising tomato prices are increasing poverty
CHP Kayseri MP Aşkın Genç drew attention to rising food inflation, citing tomatoes that have reached 169.95 TL per kilo in the shops. Assessing producer costs, energy prices and the decline in purchasing power, Genç said, “If tomatoes have now become a luxury, then economic policies have failed.”
Noting that the average weight of a tomato is 96 grams and the price per tomato is 16.32 TL, Genç said, “Citizens can no longer calculate by the kilo at the market; they are now calculating by the piece. If a single tomato costs over 16 lira, we are not just talking about vegetable prices here, but about a collapsing purchasing power.”
Genç noted that the rise in tomato prices is not limited to shelf labels alone, pointing out that in 2025, tomato production in Turkey fell from 14.617 million tonnes to 13.5 million tonnes, representing an annual decline of 7.6 per cent.
Genç stated that, according to TZOB’s April 2026 assessment, the price gap between producers and retailers had reached as high as 393.7 per cent for some products, and that price increases had been observed in 18 out of 40 products on the market.
One in five young people is not attending school
According to the European Statistical Office (Eurostat)’s report on “Early Leavers from Education and Training”, approximately 1.3 million young people in Turkey have dropped out of school. According to Eurostat’s data, the rate of early school leavers in Turkey was significantly higher than the European average. Accordingly, the early school leaving rate for the 18–24 age group stood at 17.9 per cent in 2025.
Consequently, approximately 1.35 million young people ended their educational journey without completing secondary school. The 17.9 per cent rate in Turkey indicates that roughly one in five young people left the education system early, whilst across the EU as a whole, this figure stood at one in 11.
The report covers the 18–24 age group who have completed at most lower secondary education and have not participated in any education or vocational training programme in the last four weeks; Turkey was the country with the highest rate of early school leavers compared to other European nations.
Turkey was followed by Romania at 15.5 per cent, Germany at 13.1 per cent and Spain at 12.8 per cent. The European Union (EU) average stands at 9.1 per cent. Croatia, at 2.1 per cent, and Greece, at 3 per cent, have the lowest rates.
Saudi Arabia to partner with Turkish fuel giant
It has emerged that Saudi Aramco, the state-owned company of Saudi Arabia—the world’s largest oil producer—is planning a fuel investment in Turkey. It was reported that the company has held talks with TotalEnergies, one of Turkey’s leading fuel giants. Journalist Olcay Aydilek stated that she had spoken with Uğur Doğan, Chairman of the Board of Directors of OYAK—the parent company of TotalEnergies, which operates thousands of petrol stations in Turkey—and wrote: “During our telephone conversation, he said they were in talks regarding a partnership with Saudi Aramco.”
Paşalı Group becomes the new owner of İstikbal Mobilya
The sale process for İstikbal Mobilya, one of Turkey’s long-established furniture brands, has been completed. Following a tender organised by the Deposit Insurance Fund (TMSF), the company has been acquired by the Paşalı Group. In the latest tender, the company’s value increased by approximately 4 billion TL, reaching 16.5 billion TL.
Paşalı Group, which began operations in the construction sector in 1978, has since expanded into the automotive, car rental and tourism sectors. With the acquisition of İstikbal Mobilya, Paşalı Group has made a strong entry into the furniture sector. Founded in 2005, Avek Otomotiv is one of the dealers of the Germany-based Volkswagen Group, and Paşalı Group operates as an authorised dealer and service provider for brands such as Audi, Seat, Skoda and Cupra across Istanbul, Çanakkale and İzmir under the Avek umbrella. AVEC Rent a Car, established in 2016, has also become one of the major car rental companies.
Experts warn of ‘El Niño’: A new wave of food price rises may be on the horizon
It is reported that the El Niño weather phenomenon, expected to take effect in July, could negatively impact agricultural production by altering global temperature and rainfall patterns. Experts have warned that potential production losses in products such as palm oil, cocoa, cotton and rice could trigger a new wave of food price rises.
SpaceX on track for IPO, with major investment banks on board
SpaceX, led by CEO Elon Musk, has filed an application with the US Securities and Exchange Commission for an initial public offering (IPO). While the company is set to trade on the Nasdaq under the ticker ‘SPCX’, it has been revealed that major investment banks including Goldman Sachs, Morgan Stanley, JPMorgan and Citigroup are involved in the IPO process.