Levent Gürses
The war in Iran has begun to disrupt the delicate balance of the Turkish economy. In a process that began with fuel price rises, the acceleration of price increases and the need to revise inflation targets have become inevitable developments. Indeed, international organisations and banks have begun to revise their forecasts for Turkey. They are raising their inflation and interest rate forecasts.
According to the Central Bank’s first Inflation Report, updated in February 2026, the year-end inflation forecast range for 2026 has been set at 15–21 per cent. The midpoint of this range is seen as 18 per cent. However, the report—prepared before the war even began—emphasised that inflationary dynamics remained strong and that the risks were not temporary; therefore, setting the upper limit at 21 per cent for the 2026 target would have been more sensible…
Nevertheless, due to the multi-layered effects of the war, this target has also fallen far short. The Organisation for Economic Co-operation and Development (OECD) revised its 2026 forecast to 26.7 per cent, Deutsche Bank to 27.5 per cent, and S&P Global to 28.9 per cent. In the Central Bank’s survey, the annual inflation forecast for 12 months ahead rose by 1.08 percentage points to 49.89 per cent.
Here are the week’s key developments:
The OECD’s inflation forecast for Turkey has soared
The OECD has lowered its 2026 growth forecast for the Turkish economy to 3.3 per cent. Whilst the global growth forecast for 2027 was revised down from 3.1 per cent to 3 per cent, the forecast for Turkey was revised down from 4 per cent to 3.8 per cent. The OECD has also raised its headline inflation forecast for Turkey in 2026 from 20.8 per cent to 26.7 per cent.
According to the organisation’s report, global economic growth had been maintaining its resilience before tensions in the Middle East escalated; however, it is anticipated that persistently high energy prices due to these tensions will significantly increase business costs worldwide and exert upward pressure on consumer inflation.
New forecast from S&P: Inflation and interest rates up, growth down
S&P Global has shared its analysis on Turkey in its “Economic Outlook for Emerging Markets: Q2 2026” report. Noting that rising global risks and rising energy prices have reignited inflation risks, S&P Global revised its 2026 inflation forecast from 23.4% to 28.9%. The report projected that growth this year would be 3.4%.
S&P, which forecasts a gradual normalisation in inflation, interest rates and exchange rate indicators over the next four years, estimates that consumer inflation will stand at 18.4 per cent in 2027, 13.7 per cent in 2028 and 12.7 per cent in 2029.
Despite high inflation and a more restrictive monetary policy stance, S&P Global forecasts that growth in the Turkish economy will remain resilient this year, thanks to the expected recovery in agriculture, the positive household wealth effect stemming from rising gold prices, and the momentum in credit growth. It estimates that growth will stand at 3.4 per cent in 2026, compared to a growth rate of 3.6 per cent in 2025.
A continued decline in the policy rate is expected over the same period. It is forecast to stand at 32.5% by the end of 2026, 25.0% in 2027, 12.5% in 2028 and 12.5% in 2029.
Deutsche Bank raised its inflation and interest rate forecasts
German bank Deutsche Bank has revised its analysis for Turkey in a report titled “Turkey: A More Challenging Macro Path” due to rising energy prices caused by events in the Middle East. The report noted that growth is showing a fragile structure in the face of weak external demand and tightening financial conditions, and the GDP growth forecast was revised down from 4.2% to 3.2%.
The report, which anticipates a more challenging disinflation process, raised the end-2026 inflation forecast from 25% to 27.5% due to pressures from energy prices and risks in service inflation.
Deutsche Bank reported that the possibility of an interest rate cut in April has been ruled out, forecasting that the Central Bank will maintain its tight monetary policy for some time. In its base-case scenario (assuming the reopening of the Strait of Hormuz and a easing of energy prices), it was reported that the CBRT is expected to maintain its current stance at the April meeting and keep the policy rate steady at 37 per cent. The bank announced that it has raised its policy rate forecast for the end of 2026 from 31 per cent to 33.5 per cent.
Central Bank survey inflation forecast: nears the 50% mark
According to data from the Central Bank’s “Household Expectations Survey” for March, which received responses from 2,985 households, households’ annual inflation expectations for the next 12 months rose by 1.08 percentage points to 49.89 per cent. The public expects food, fuel and energy prices to rise the most.
The product/service groups that households assessed as having seen the greatest price increases over the past year and expect to see the greatest price increases over the next 12 months were “food” and “fuel and energy”. The proportion of participants who rated food as one of the product groups with the highest price increases fell by 0.6 percentage points compared to the previous month, dropping to 40.5 per cent.
EBRD: Capital outflows could accelerate due to the Iran War
The European Bank for Reconstruction and Development (EBRD) is preparing to revise its regional growth forecasts downwards due to the crisis caused by high energy and fertiliser prices resulting from the Iran War, disruptions in trade and tourism flows, and tightening financing conditions. According to the EBRD, whilst bond yields are rising in the Southern and Eastern Mediterranean and Turkey, capital outflows could accelerate should global financial conditions deteriorate.
The risk of revenue loss is particularly prominent in economies such as Jordan, Lebanon and Egypt. It is noted that whilst bond yields are rising in the Southern and Eastern Mediterranean and Turkey, capital outflows could accelerate should global financial conditions deteriorate.
Taking into account a wide range of factors, from energy and food to fiscal buffer capacity, Lebanon, Jordan, Iraq, Egypt, Ukraine, Mongolia, Senegal, Tunisia, Moldova, Kenya, Turkey and North Macedonia are among the most vulnerable economies. It was emphasised that Egypt, Morocco and Senegal have both large energy trade deficits and high oil-dependent economies.
Alarm bells in agriculture: Fertiliser and fuel price hikes hit production
Price hikes for fertiliser and fuel, driven by conflicts in the Middle East, have deepened the crisis in the agricultural sector. Farmers struggling to produce amid rising costs are issuing a serious warning about food security.
According to a report by Songül Dalgıç Bilgili in Nefes newspaper, successive price hikes on fertiliser and fuel, driven by the conflicts in the Middle East, have deepened the crisis in agriculture. The price per tonne of urea fertiliser has risen from 25,000 TL to 30,000 TL, whilst DAP fertiliser has gone up from 34,000 TL to 38,000 TL. Diesel, which was sold at 60.35 lira on 27 February, has risen to 74 lira. Farmers, struggling to continue production under a debt burden of 1.3 trillion lira, are finding it difficult to sustain production in the face of exorbitant price increases in fertiliser and fuel – which account for 60 per cent of their costs – whilst the country’s food security has been put at risk.
TUAC President Bayraktar calls for a support package for fertiliser and diesel
Şemsi Bayraktar, General President of the Turkish Union of Agricultural Chambers (TUAC), has called for a support package for fertiliser and diesel following the rise in input prices caused by the US-Israel-Iran conflict. Highlighting the rise in farmers’ costs, Bayraktar called on relevant institutions and organisations to implement measures to alleviate the cost pressure on producers, taking into account the possibility of the conflict dragging on.
Bayraktar stated, “Following the conflict between Iran and Israel in June 2025, fertiliser prices, particularly URE, rose by as much as 40 per cent overnight. After the war began on 28 February 2026, the same scenario unfolded again, with fertiliser and diesel prices rising.”
Bayraktar noted that the price of diesel, which was 61 lira 41 kuruş per litre before the war, rose by 22.3 per cent to 75 lira 12 kuruş following the conflict, adding, “Approximately 40 per cent of the diesel price, which is now approaching 80 lira per litre, consists of tax.”
TFA President: Fruit prices could rise three to fourfold during the summer months
Hidayet Muslu, President of the Turkish Farmers’ Association (TFA), said: “A very bleak picture awaits us this year. It is no longer enough to simply call this a ‘price hike’. Even if produce is available, people may not be able to afford it. Access to food will become a serious problem, particularly for pensioners and low-income citizens. Hunger is at the door,” he warned. Muslu added, “Over the last 10 years, both climate change and rising costs have ruined the farmer. Farmers are currently effectively working for oil companies.”
“Agriculture has shrunk by 8.8 per cent, and this situation will only get worse”
Recalling that whilst the Turkish economy grew by 3.6 per cent last year, the agricultural sector was the only one to shrink by 8.8 per cent, Muslu said, “When input and transport costs combine with purchasing power, the outlook ahead will become even bleaker. “Prices for imported goods, particularly spices sourced from Iran, could reach astronomical levels. We shouldn’t be surprised if fruit prices triple or quadruple during the summer months,” he said.
Muslu reported that prices are now fluctuating hourly and that agriculture has become unsustainable. He emphasised that even if subsidies were provided at the rate of 1 per cent of GDP, as stipulated in the Agriculture Law, this would not constitute a solution for farmers, and that treating agriculture as a new strategic sector is an absolute necessity.
War in the oil markets and Trump’s statement on negotiations…
The war in the Middle East is causing volatility in the oil markets. Brent crude, which rose to as high as $114 per barrel at the start of the week, was trading at $108 as of Friday 27 March. Although US President Donald Trump’s claim that he had postponed the threat of an attack and was seeking talks with Iran pushed prices down, Israel’s continued attacks are maintaining the sense of unease.
Diesel prices first rose, then fell
As oil prices fell amid growing prospects of a ceasefire and diplomatic contact in the US-Israel-Iran tensions, this decline was reflected in fuel prices. A reduction of 5.44 TL per litre in the price of diesel is expected from Friday 27 March, with prices forecast to fall to 68.54 TL in Istanbul, 69.68 TL in Ankara and 69.95 TL in Izmir.
Fitch: Oil prices could reach $120 if the Strait of Hormuz remains closed for six months
International credit rating agency Fitch Ratings has stated that if the Strait of Hormuz remains closed for six months, the price of Brent crude could rise to an average of $120 per barrel in 2026. Whilst it was noted that a three-month closure could see prices reach an average of $100, a warning was issued that geopolitical risks would increase price volatility.
Former Petroleum Pipeline Transport Corporation (BOTAŞ) General Manager Gökhan Yardım: No supply issues even if Iranian gas is cut off Commenting on Iran’s potential suspension of gas flows to Turkey, former BOTAŞ General Manager Gökhan Yardım said, “The reports are unclear; even if the flow has decreased or been cut off, I do not think there will be a problem.” According to a report by Mehmet Kaya in Ekonomim, Yardım noted that Turkey has a contract for approximately 61 billion cubic metres, including domestic production, and that Iran accounts for a volume of 9–9.6 billion cubic metres within this. Noting that any disruption to gas supplies from Iran in the short term would not have a significant impact due to improving weather conditions, Yardım emphasised that the shortfall could be met on a spot basis from both existing pipelines and other sources until December this year and January 2027.
Airfares are rising on some routes due to the war
War-related disruptions in the Persian Gulf have hit global air traffic. According to Alton Aviation Consultancy, ticket prices on the main routes connecting Asia and Europe have risen by up to 560 per cent this month. Analysts noted that, due to the ongoing impact of war-related disruptions in the Persian Gulf—the world’s busiest transit corridor—current high levels are expected to persist throughout the summer and into autumn, with demand expected to continue weakening.
United Airlines, meanwhile, announced that it would reduce its flight capacity by 5 per cent in 2026 due to rising jet fuel prices caused by the war in Iran. CEO Scott Kirby stated that if prices remain at this level, fuel costs would reach 11 billion dollars.
Gold continues to fall; experts call it a “buying opportunity”
With the outbreak of the war in Iran, gold prices—which had already begun to fall, much to investors’ surprise—lost further value last week. Factors behind the decline in gold’s value include speculative selling, the strengthening of the US dollar, and expectations that the US Federal Reserve (Fed) will slow down its interest rate cut cycle… As of Friday morning, 27 March, gold was trading at $4,467 per ounce, having stood at $4,690 on 20 March. During the week, it fell as low as the $4,340 range.
Gold has lost 16 per cent of its value over the past month. It had reached a historic high of $5,603 per ounce in January, and has since fallen by 21 per cent from that peak.
However, expectations remain bullish… For example, JPMorgan is maintaining its long-term target of $6,300. Consequently, analysts view this period as a gradual buying opportunity for long-term investors. Priyanka Sachdeva, Senior Market Analyst at Phillip Nova, noted that the ongoing pullback in gold could present ‘gradual’ long-term accumulation opportunities at lower levels.
WGC draws parallels with 2008 and 2020, highlighting liquidity needs
In the World Gold Council’s (WGC) weekly assessment, it was noted that the sharp rise in bond yields during a week marked by key central bank meetings and rising geopolitical tensions had pushed gold prices to their lowest levels of the year. Market movements were likened to the 2008 and 2020 periods, when liquidity needs came to the fore.
WGC analysts stated that rising real yields and expectations of policy rate hikes in 2026 were weighing on gold prices. The analysis noted that daily developments regarding conflicts in the Middle East would continue to influence the gold market.
Central Bank reserves fell by $12 billion due to the decline in gold prices
The Central Bank of Turkey’s (CBRT) total reserves fell by $12.167 billion compared to the previous week, dropping to $177.458 billion in the week ending 19 March. The CBRT released its weekly monetary and banking statistics. According to these figures, as of 19 March, the Central Bank’s gross foreign exchange reserves rose by 5 billion 806 million dollars to 61 billion 292 million dollars. Gross foreign exchange reserves stood at 55 billion 486 million dollars on 13 March.
During this period, gold reserves fell by $17.974 billion, dropping from $134.140 billion to $116.166 billion. Consequently, the Central Bank’s total reserves fell by 12 billion 167 million dollars in the week ending 19 March, dropping from 189 billion 625 million dollars to 177 billion 458 million dollars compared to the previous week.
Since the start of the war, the Central Bank has seen a loss of nearly 35 billion dollars in its net international reserves, whilst total foreign exchange sales reached 26 billion dollars over the same period.
Bloomberg: CBRT preparing to deploy gold reserves to protect the lira
It has been claimed that the CBRT is preparing to deploy its gold reserves to protect the Turkish lira against the volatility caused by the ongoing war in the Middle East in global markets. According to sources speaking to Bloomberg, the Central Bank is preparing a broader policy toolkit that would allow it to deploy its gold reserves when necessary.
Sources who provided information to Bloomberg stated that the CBRT is preparing to expand its policy toolkit, noting that this could include utilising Turkey’s substantial gold reserves and evaluating the option of conducting gold-backed foreign exchange swap transactions in the London market.
Fastest decline in business confidence in 4.5 years
The business confidence index fell by 3.1 points in March compared to the previous month, standing at 101. Consequently, business confidence experienced its sharpest decline since October 2021. The Central Bank released the Economic Trends Statistics and Real Sector Confidence Index for March. The seasonally adjusted Real Sector Confidence Index (RSCI-MA) fell by 4.1 points compared to the previous month, standing at 100.0.
Record short-term external debt: 239 billion dollars
The Central Bank published short-term external debt data for January 2026. The short-term external debt (STED) stock, which reflects debts with a remaining maturity of one year or less regardless of the original maturity, stood at 239 billion dollars. This figure was recorded as a record high for short-term debt.
The short-term external debt (STED) stock increased by 3.6 per cent compared to the previous month, reaching 173.4 billion dollars as of January. The STED stock, which reflects debt with a remaining maturity of one year or less, regardless of its original maturity, stood at 239 billion dollars. The stock of short-term external debt attributable to banks rose by 7 per cent compared to the previous month, reaching 77.5 billion dollars.
Erdoğan signs off: 54 properties to be privatised
Following a decision by AKP President Tayyip Erdoğan, a large number of properties registered in the name of the Treasury, along with the buildings on them, have been included in the privatisation programme. It was stated that the proceeds from the privatisation will be transferred to the Treasury to be used for the Ministry of National Defence’s building, facility and accommodation projects, as well as its investment programmes. According to the decision, 27 properties in Ankara, 1 in Aydın, 1 in Balıkesir, 1 in Bolu, 3 in Hatay, 6 in Istanbul, 1 in Izmir, 3 in Kayseri, 1 in Kırklareli, 2 in Kocaeli, 2 in Malatya, 1 in Muğla, 2 in Tekirdağ and 3 in Yalova will be privatised. It is anticipated that the transactions will be completed by 31 December 2028.
The true picture; broad-based unemployment has risen to 29.7%
In the Research Centre of Confederation of Progressive Trade Unions of Türkiye’s (DİSK-AR) report, it was noted that whilst the narrowly defined unemployment rate, which stood at 8.7 per cent in 2024 according to TurkStat data, fell by 0.4 percentage points to 8.3 per cent in 2025, this figure represents only the tip of the iceberg. The report emphasised that to understand the true picture of unemployment, one must look at the broad-based unemployment rate, and included the following information:
“Despite the decline in the narrowly defined unemployment rate, the broad-based unemployment rate continues to rise. The broad-based unemployment rate, which stood at 26.7 per cent in 2024, rose by 3 percentage points over the past year to reach 29.7 per cent in 2025. The widening gap between the broad and narrow definitions of unemployment, and the rise in the broad unemployment rate, is due to an increase in the potential labour force, which includes those underemployed due to temporary circumstances, those who have lost hope of finding work, those ready to work but not currently seeking employment, and those seeking work but unable to start immediately.”
The report noted that the narrowly defined unemployment rate in Turkey stood at 8.3 per cent and the broad-based unemployment rate at 29.7 per cent, whilst the average narrowly defined unemployment rate across the 27 EU member states was 6.3 per cent and the broad-based unemployment rate 12.2 per cent. The report stated, “The broad-based unemployment rate in Turkey is 2.4 times that of the 27 EU member states.”
Assoc. Prof. Dr. Oyvat: Part-time workers are increasing the underutilised labour force
According to TurkStat data, narrowly defined unemployment has fallen to its lowest level in 21 years. However, broad-based unemployment hit a record high of 29.7 per cent. According to an analysis by Assoc. Prof. Dr. Cem Oyvat, whilst Turkey has slipped to 20th place globally in terms of the underutilised labour force, the main cause of the crisis was the massive increase in the number of people ‘forced into part-time work and wishing to work more’.
According to a report by Berfu Kargı in Karar, Assoc. Prof. Dr. Cem Oyvat from the Centre for Economic Policy Research at the University of Greenwich shed light on the background of this contradictory picture through his detailed analysis. While narrowly defined unemployment is at its lowest level in 21 years, Assoc. Prof. Dr. Cem Oyvat’s analysis highlights that the underutilised labour force has reached its highest (29.7 per cent). According to Dr Oyvat’s analysis, whilst the rise in the graph is partly due to the ‘potential labour force’ who have given up hope of finding work, the real surge is occurring in the ‘Time-Related Underemployment’ category.
Defining this situation as “people working fewer than 40 hours a week but stating they could work more if given the opportunity”, Oyvat noted that this group alone increased the underemployment rate by 8.8 percentage points between 2019 and 2025.
Noting that Turkey’s underemployment rate is well above global standards, Oyvat stated, “We are the 20th country with the highest underemployment rate among 137 nations. In Greece, which has long complained of unemployment, the 2024 underemployment rate stands at 15.0 per cent, and in Spain at 18.6 per cent.”
“The number of unemployed registered has reached 2 million 456 thousand”
CHP Niğde MP Ömer Fethi Gürer revealed that the economic crisis has deepened the cycle of unemployment and debt. According to data shared by Gürer, the number of unemployed registered with İŞKUR (Turkish Employment Agency) has increased by 312 thousand compared to last year, reaching 2 million 456 thousand.
Whilst the number of people applying for unemployment benefit in the January–February period reached 351,000, only 46 per cent of these individuals were able to receive payments due to stringent conditions. Gürer stated, “As only those who have been made redundant can apply for unemployment insurance, these figures indicate that at least 351,000 people lost their jobs in two months.” He emphasised that the contraction in industry and the rise in requests for bankruptcy protection had triggered redundancies in the private sector.
Sanovel has been sold; former partner says, “We’ve handed it over to foreigners for a song”
The majority shares of Sanovel, one of Turkey’s leading pharmaceutical manufacturers, have been transferred to UK-based Afendis Capital Management. The sale took place against the backdrop of family inheritance disputes, with former partner Zafer Toksöz reacting by saying, “Half a century’s worth of value has been handed over to foreigners for a song.”
Major sale from Eczacıbaşı: Selpak and Solo transferred to a Malaysian company
The Eczacıbaşı Group is transferring its 100% stake in Sanipak—which encompasses the Selpak, Solo, Silen and Servis brands synonymous with 56 years of tissue paper production—to Malaysia-based Arch Peninsula Sdn Bhd. The sale price has been announced as 600 million dollars. This transfer is regarded as a significant turning point in Turkey’s industrial history.
“We make toilet paper, but we import 100% of the raw material, cellulose”
Murat Muratoğlu, a columnist for Nefes, commented on the sale of Sanipak—which owns the Selpak and Solo brands under Eczacıbaşı Holding—stating: “There is a bitter truth: cellulose… We produce toilet paper and tissues in Turkey, but we import 100 per cent of the cellulose used as raw material. “Why… Because Turkey stopped producing cellulose… There used to be SEKA. It was completely shut down in 2005 and merged with Sümer Holding. The factory sites became residential areas. The machinery was sold off for scrap.”
Muratoğlu also commented on the sale: “They call it ‘strategic focus’… “They call it ‘dynamic portfolio management’… ‘We’ll focus on Vitra, healthcare and technology,’ they say… It’s true… It makes sense on paper. Still, it’s saddening,” he said.
Koç Holding sells 9.3 billion TL stake in Tüpraş
Koç Holding sold its 2.1 per cent stake in Tüpraş to domestic and foreign institutional investors via an accelerated book-building process for 9.32 billion TL. The initial announcement on the Public Disclosure Platform (KAP) stated that the share sale, originally specified as up to 30 million TL in nominal value, was increased to 40 million TL following demand from investors. It was stated that the transaction was completed for a total of 9.32 billion TL at 233 TL per share.
Following the transaction, Koç Holding’s direct stake in Tüpraş fell to approximately 4.3 per cent, whilst Tüpraş’s public float rose to 48.9 per cent. The holding company will continue to control 50.7 per cent of Tüpraş’s capital through its 4.3 per cent direct stake and the 46.4 per cent stake held by its subsidiary, Enerji Yatırımları A.Ş.