Levent Gürses
In August, monthly inflation stood at 2.04 per cent, exceeding expectations of 1.79 per cent. According to Turkish Statistical Institute (TurkStat) data, annual inflation continued to decline due to the base effect, falling to 32.95%. In contrast to TurkStat’s data, Inflation Research Group (ENAG) reported monthly inflation at 3.23% and annual inflation at 65.49%.
The difference between the inflation rate announced by TurkStat and ENAG has nearly doubled, with Turkey ranking first in inflation in Europe and the Eurozone by a wide margin. (European Union average is 2.4 per cent) Turkey ranks seventh in the world according to TurkStat data and third according to ENAG data, behind Venezuela (136 per cent) and Zimbabwe (93.8 per cent).
Wages are rapidly eroding
Meanwhile, rising inflation has begun to erode the wage increases granted for the second half of the year. The 6% and 5% increases granted to civil servants and pensioners are being eroded by two months’ total inflation of 4.14%, which was 2.06% in July and 2.04% in August.
According to the Confederation Of Progressive Trade Unions Of Turkey Research Group (DİSK-AR) report, the total inflation loss for workers reached 525.5 billion TL, while the loss for minimum wage earners alone amounted to 4,218 TL.
Champions of price increases: rent, food, transport
According to TurkStat data, although annual inflation fell to 32.95 per cent largely due to base effects, the rate of increase in food, rent and transport continues unabated. Bread, eggs, cheese and tea were once again the champions of price increases. The annual increase in rent exceeded 74 per cent.
In August, the highest annual price increases recorded by TurkStat were: fresh fruit 80 per cent; rent 74 per cent; secondary education 68 per cent; pre-school and primary education 67 per cent; nurseries 60 per cent; eggs 58 per cent; student dormitories 52 per cent and bread 38 per cent.
Fresh fruit increased by 80 per cent annually and 4.1 per cent monthly.
The food products with the highest price increases in August were as follows: bread 8.1 per cent; margarine 5.6 per cent; tea 5.2 per cent; eggs 4.9 per cent; fresh fruit 4.1 per cent; cheese 3.7 per cent.
In his assessment of the August inflation figures, Treasury and Finance Minister Şimşek emphasised that frost and drought had an impact of 0.7 points on the monthly inflation rate for the food group. Şimşek said, ‘While core goods inflation stood at 19.8 per cent, services inflation fell to 45.8 per cent, the lowest level since April 2022.’
Half a point above the long-term average
Prof. Dr. Şenol Babuşçu stated that the monthly inflation figure for August 2025 was 0.51 points above the 62-year average. Prof. Dr. Babuşçu stated that the average inflation rate between 1964 and 2005 was 1.53 per cent, and that the 2.04 per cent increase in August this year was half a point above the average for those years.
Prof. Dr. Hakan Kara stated that the improvement in inflation since the beginning of the year has been very limited, adding, “There is no significant slowdown in demand either. The risk factors remain unchanged. In this environment, there will be no 300 basis point cut.”
Economist Iris Cibre commented, “Food prices are soaring in August, which is the summer month. Seasonally adjusted monthly prices slowed to 0.80 per cent for basic goods, while food prices rose by 4.44 per cent and fresh fruit and vegetables by 6.37 per cent. The inflation trend for the next 12 months has risen to 32 per cent. The Central Bank will likely cut interest rates, citing temporary food-related effects. I still expect a cut of 250-300 basis points.”
It must not exceed 1.5 per cent in the remaining four months of the year
An interesting comment also came from economist Menekşe Yılmaz. Yılmaz calculated that, in order to meet the inflation target, it must not exceed 1.5 per cent in the remaining four months of the year. Menekşe Yılmaz’s post reads as follows: ‘The CBRT’s 2025 year-end TurkStat inflation forecast ’upper limit” is 29 per cent. Inflation for the first eight months is 21.5 per cent. For the remaining four months, the average monthly inflation should not exceed 1.5 per cent. The 2026 forecast “upper limit” is 19%, and the monthly average inflation rate should again not exceed 1.5%. The CBRT management has been in office for 25 months, and inflation has been at or below 1.5% three times in those 25 months.”
Economist İnan Mutlu commented on the situation as follows: “A summary of the 26-month Şimşek period… The world’s second-highest interest rate: 43%, the world’s eighth-highest inflation: 32.95%, pandemic-level unemployment: 29.6%…
We grew in construction, we shrank in agriculture
The other important data release of the week was the second-quarter growth. According to the Turkish Statistical Institute (TÜİK), growth in the second quarter exceeded expectations, reaching 4.8 per cent. The construction sector made the largest contribution to growth, while the agricultural sector experienced contraction for two consecutive quarters.
The construction sector was the driving force behind growth at 10.9 per cent, while industry grew by 6.1 per cent, information and communication by 7.1 per cent, and trade, transport and accommodation services by 5.6 per cent.
In contrast, the agriculture sector, which contracted by 2 per cent in the first quarter of the year, shrank by 3.5 per cent. There was also a 1.2 per cent contraction in areas such as public administration, education, health and social services.
Household consumption expenditure increased by 5.1 per cent in the second quarter of 2025 compared to the same quarter of the previous year. While the public continued consumption through credit and debt, public social expenditure support was withdrawn.
Growth in the industry came from the defence sector, which does not create employment.
Economist Prof. Dr. Hayri Kozanoğlu commented on the growth in industry as follows:
“The 6.1 per cent expansion in industry, which contracted by 1.8 per cent in the first quarter, is noteworthy. Although we do not have the breakdown figures, it is estimated that this surge in industry originated in the defence sector. Defence is a production sector that does not create much employment and does not positively reflect on the average person’s welfare. A country like Turkey’s focus on arms production also invites it to engage in military adventures abroad. It also leads to the absorption of resources that would otherwise be directed towards social spending in the budget. This is one of the main reasons why salaried workers do not feel the growth in their lives.”
Per capita income in 2024 will be $15,325…
On the other hand, although labour payments increased by 42 per cent in the second quarter compared to the same quarter of the previous year, the share of labour payments in gross value added fell from 38.8 per cent in the same period last year to 38.4 per cent in the second quarter of this year. In contrast, the share of operating profits rose from 39.5 per cent to 40.2 per cent.
TurkStat also published annual gross domestic product data for 2024. According to this data, the Turkish economy reached a size of 52.4 trillion Turkish lira and 1 trillion 474 billion dollars in the second quarter. Per capita GDP in 2024 was 503,076 TL at current prices and 15,325 dollars.
Şimşek: We are approaching an important threshold in sustainable prosperity growth
Treasury and Finance Minister Mehmet Şimşek said, ‘We anticipate that growth will gradually reach its potential level in the coming period,’ regarding the growth data announced by the Turkish Statistical Institute (TurkStat). Şimşek also argued in a post on his Next Social account that ‘a significant threshold has been reached in the permanent increase in prosperity, which is the ultimate goal of the economic programme.’
Citigroup expects a ‘mild recession’ in the second half
Citigroup economists announced their expectations of a ‘mild recession,’ pointing to weakness in manufacturing PMI and the labour market in Turkey in the second half of the year. The economists emphasised that normalisation in consumption, high credit rates and slowing growth in export markets would constrain economic activity.
Students facing hunger in the new year
With the start of the school year, the burning issue of school nutrition has returned to the agenda. Economist Kerim Rota calculated that providing one meal a day to 15 million children would cost a maximum of $6 billion annually. This is equivalent to 1.5 per cent of total public spending in 2025.
In this context, the Ministry of National Education’s payment of 35.7 million lira for the ‘Year of Education’ meeting, held at a hotel owned by Gürkan Dölekli, a partner of Aziz İhsan Aktaş, the famous confessor in the İmamoğlu case, drew criticism.
Parents, meanwhile, state that their children’s physical development is under threat. Veli-Der organised a protest in Istanbul, reminding the government of its promise of ‘free school meals’ and calling for ‘a meal to be provided, as high prices are hitting parents hard.’
Economist Uğur Gürses drew attention to an interesting topic. Noting that Indonesia has launched a free meals programme, Gürses said, “It covers students, pregnant women and breastfeeding women in schools. A programme worth $4.3 billion is expected to reach 83 million people by 2029. Compared to the budgets allocated for expensive motorways and bridges built for political gain, this is a very small budget.”
Journalist and author Menekşe Tokyay, in her new book, brings to the fore the most overlooked issue in the tangle of problems in our education system: children trying to hide their hunger in primary school corridors, alongside their peers who come to school with packed lunchboxes and plenty of pocket money…
Prof. Dr. Ensar Yılmaz: Public education is essential
Yildiz Technical University Faculty Member Prof. Dr. Ensar Yılmaz drew attention to a different problem in education and called for public education. Prof. Dr. Yılmaz said, “Public education is essential. Private schools create and perpetuate inequality. The state’s neglect of widespread quality education leads to the promotion of substandard services to the masses.
Private schools instil a certain mindset/attitude in students, leading them to internalise power relations. Furthermore, the gradual deterioration of public schools forces families to turn to private schools, placing them under significant economic strain. Those who have spent their lives trying to buy a home now find themselves working to cover their children’s education costs.”
Gold and silver hit record highs amid expectations of falling interest rates…
The price of gold per ounce hit a record high of $3,578.54 on Wednesday, 3 September. Investors’ search for a safe haven is increasing demand for gold. Gold is gaining value in foreign markets as the US dollar continues to lose value and the US Federal Reserve (Fed) is expected to cut interest rates at its September meeting. Another reason for the demand for gold is the politicisation of monetary policies, particularly in the US… US investment bank Goldman Sachs stated that if confidence in the Fed is shaken, the price of gold could reach $5,000 per ounce.
Experts emphasise that a significant interest rate cut at the Fed meeting on 16-17 September could further intensify the rally in precious metals.
Meanwhile, the ratio of gold reserves held by central banks worldwide to total reserves has exceeded the ratio of US Treasury bonds to total reserves for the first time in 30 years.
The price of silver also rose above $40, reaching $41.33, its highest level since 2011. In silver, industrial demand, alongside investor demand, is pushing prices up, and high demand has led to a “supply shortage” for the fifth consecutive year. Physical silver stocks in the UK are reported to be rapidly declining.
In the domestic market, the price of gold per gram broke records, starting at 4,717 Turkish lira on Thursday, 4 September.
As of the end of August, gold per ounce was the most profitable asset in the global investment world in 2025, with a return of 33 per cent. Bitcoin followed with a return of 17 per cent. Oil prices lost 11 per cent of their value.
Bad signals are coming from the textile sector
The results of the Istanbul Chamber Of Industry Turkey Manufacturing Purchasing Managers’ Index (PMI) survey for August 2025 have been announced. The headline PMI remained below the threshold value of 50 in August. The ISO Manufacturing PMI rose to 47.3, while the previous month’s value was measured at 45.9.
A slowdown in new orders was observed in August, while the slowdown in new export orders was even more pronounced. The ISO report stated, ‘The weakening trend in production that began in April 2024 continued.’
Layoffs also accelerated in the contracting manufacturing sector. The ISO report stated, ‘Companies have significantly reduced employment since April 2020 due to the easing of their workload.’
The sector experiencing the sharpest decline in production was textiles. Textiles also showed the weakest performance in new orders. This sector recorded the highest rate of decline in the number of employees since the survey began in January 2016. The employment index, which was 41.9 in July, hit rock bottom this month at 40.4.
Enforcement and bankruptcies, debts in arrears continue to rise
The number of enforcement and bankruptcy cases is also steadily increasing. As of 3 September 2025, the number of enforcement and bankruptcy cases in enforcement offices reached 24 million 455 thousand 903. The increase since 3 September last year was approximately 2 million.
Furthermore, between 25 July and 29 August, consumer loan debts subject to legal proceedings increased by 5.8 billion lira, while credit card debts increased by 5 billion lira. Credit card debts subject to legal proceedings exceeded 101 billion lira, while loan debts exceeded 97 billion lira.
Wage negotiations have begun in the metal industry
The collective bargaining process, covering the country’s largest employer group spanning many sectors from white goods to automotive, iron and steel to electronic systems manufacturing, has officially begun. The Turkish Metal Workers’ Union, which has the largest membership, has demanded an increase equivalent to 38.97 per cent for the first six months. United Metal Workers, meanwhile, announced wage increase demands of 58.5 per cent for the six-month period.
Global stock markets are experiencing their best year since 2009
Global stock markets are experiencing their best year since 2009. All global stock markets except Wall Street gained 22 per cent between the beginning of the year and 12 August. According to investment advisor Charlie Biello’s analysis, the Eurozone is experiencing its best year since 2003, with a 30 per cent performance. Germany stood out with 35 per cent. Emerging markets rose by 20 per cent. The best stock markets of 2025 were Greece with 74 per cent, Poland with 66 per cent, Spain and Austria with 54 per cent, and Vietnam with 52 per cent. Turkey was one of four stock markets (India, Thailand, Saudi Arabia) that lost 2 per cent since the beginning of the year.
Europe is increasing its defence spending
According to the report titled ‘Defence Data 2024-2025’ published by the European Defence Agency, the defence spending of the 27 EU member states increased by 19 per cent to €343 billion in 2024. This figure is expected to reach a record high of 381 billion euros in 2025, equivalent to 2.1 per cent of GDP. It was also highlighted that defence investments exceeded 106 billion euros for the first time in 2024, accounting for 31 per cent of total spending, which is the highest rate recorded.
Google does not need to sell Chrome
A federal court in the US has rejected the Justice Department’s request, ruling that Google does not need to sell its Chrome browser. The court also stated that Google would not be forced to divest its Android operating system, imposing only a data-sharing requirement to encourage competition.
Major natural gas cooperation between Russia and China
Russian Energy Minister Sergey Tsivilev announced that agreements had been signed to supply China with 106 billion cubic metres of natural gas per year, stating that this would provide a strong alternative to supplies to Europe. Cooperation agreements were also signed for capacity increases in the Power of Siberia pipelines and for Rosneft to supply additional oil to China.
Accordingly, while signing the agreement for the Power of Siberia 2 pipeline, it was decided to increase the capacity of the existing pipeline, raising the annual natural gas shipment to 44 billion cubic metres. Gazprom Chairman Miller announced that the target is to ship up to 50 billion cubic metres of gas to China annually via the new route.
Kirill Dmitriev, Russian President Putin’s economic representative, said that the EU’s wrong decisions had led to high energy prices, inflation and a migration crisis. Dmitriev emphasised the historical importance of the Power of Siberia 2 natural gas pipeline agreement, stating that gas destined for Europe would be redirected to China.
Other important developments of the week are briefly as follows:
Fluctuations in exchange rates and oil prices, along with tax increases, continue to affect fuel prices. Diesel fuel has increased by 2 lira 5 kuruş. The average price of diesel fuel in Istanbul has risen from 52 lira 21 kuruş to 54 lira 26 kuruş per litre.
The Treasury and Finance Ministry announced its domestic borrowing strategy for the next three months. Accordingly, the Treasury will borrow 823.2 billion lira against 614.1 billion lira in domestic debt servicing during the period in question.
The court’s ruling in the case filed to cancel the CHP Istanbul 38th Ordinary Provincial Congress to remove CHP Istanbul Provincial Chairman Özgür Çelik and his administration from office caused sharp fluctuations in the markets. Following the decision, the BIST 100 index fell by 5 per cent.
In the US, jobless claims rose by 8,000 last week to 237,000, exceeding expectations. While the four-week average rose, continuing claims fell to 1.94 million.
We grew in the second quarter thanks to construction, but we cannot control inflation
