Levent Gürses
The Economic Programme aimed at combating inflation and ensuring fiscal discipline, implemented by Mehmet Şimşek, Minister of Treasury and Finance, and known to the public as the ‘Şimşek Programme’, marked its third year last week. Turkey is still grappling with stubborn inflation that refuses to fall below 30 per cent and food inflation standing at 36.6 per cent. All sectors of the economy and economists are voicing complaints about the Şimşek Programme and are calling for it to be brought to an end as soon as possible.
Economist İnan Mutlu wrote: “Three years of the ‘Şimşek Programme’… The Turkish economy has gone from bad to worse. We have the world’s second-highest policy interest rate and the fifth-highest inflation rate. We are facing the highest unemployment figures in our history.”
Business representatives, who made a series of statements last week, emphasised that the programme’s time had run out.
“A paradigm shift is needed, and an exit strategy must be formulated”
MÜSİAD President Burhan Özdemir said, “I believe the tight monetary policy has long since run its course. We have seen and understood that we cannot solve our problems solely through tight monetary policy. A paradigm shift is needed, and the state must formulate an exit strategy.”
“Either this programme will be abandoned, or nothing else will be possible”
TİM President Mustafa Gültepe, noting that industrialists are struggling to breathe due to high interest rates and rising costs, said, “Either this programme will be abandoned, or nothing else will be possible. Economic policies must change.”
Gültepe explained, “There is a programme in place. Because of that programme, there is a strategy; there is a style of play modelled on football. In the current situation, no one can change this style of play.” He continued, “If I can’t breathe today, how will I build a brand in the future? We’ve reached this point today. What will happen next? We’re losing what we have. I can’t breathe, and you’re telling me to build aeroplanes. I can’t breathe; I need to breathe. There are problems across all industries. We are aware of the stagnation in Europe. Right now, we are losing our existing market,” he said.
“The ratio of financing costs to operating profit has reached 87 per cent”
Erdal Bahçıvan, Chairman of the Board of Directors, who announced the 2025 results of the “Turkey’s Second 500 Largest Industrial Enterprises (ISO Second 500)”, which covers smaller and medium-sized enterprises, Erdal Bahçıvan, Chairman of the Board of Directors, noted that the ISO Second 500 study highlights not only the performance of companies but also the resilience and production capacity of Turkish industry.
Drawing attention to the fact that the biggest problem facing industrialists is the cost of finance, Bahçıvan stated that the ratio of finance costs to operating profit had risen to 87 per cent, and that industrialists were forced to allocate a significant portion of their earnings to finance costs.
Bahçıvan emphasised that, despite all the adverse conditions, industrial enterprises have continued production, maintained their appetite for investment and remained the cornerstone of the Turkish economy. He noted that supporting investments in productivity, high added value, technology and transformation with appropriate financing options is of strategic importance for enhancing the competitiveness of the industrial sector.
Bahçıvan noted that President Recep Tayyip Erdoğan and the economic management had placed the industry’s financing needs among their priority agenda items and welcomed the announced financing incentive package, expressing the hope that steps to support production capacity and competitiveness would continue.
Teksan Generator topped the ISO Second 500 list, whilst Norm Salihli Vida came second and Biska Tekstil third.
“It is now time to bring structural reforms to the agenda”
TEPAV Director and economist Coşkun Cangöz said: “Following the experimental policies that began under Albayrak and reached their peak under Nebati, the Şimşek era also saw an experiment to test whether ‘inflation can be reduced through monetary policy alone’. Given that these have proven ineffective, can we now put structural reforms – primarily concerning the rule of law, social security and fiscal discipline – on the agenda?‘
’Şimşek’s policies are a covert IMF programme”
Prof. Dr Ahmet Saltık, however, pointed out that this programme is in fact a covert IMF programme, asking: “Were you expecting anything positive from a covert IMF programme?” Prof. Dr Saltık noted that IMF programmes bring about deliberate impoverishment and deprivation, and listed their characteristics as follows:
1. Curbing public expenditure
2. Tight monetary policy
3. Exchange rate flexibility
4. Privatisation of public economic enterprises (KITs)
5. Regulations facilitating foreign capital inflows
6. Increasing indirect taxes…
Prof. Dr Ahmet Saltık continued: “In summary, whilst IMF programmes aim to ensure macroeconomic stability in the short term, they generally result in social costs such as economic slowdown, rising unemployment and poverty, and a deterioration in public health in the short term due to a contraction in demand and cuts to public spending. This is typically what we have experienced.”
‘The real sector will suffer greatly’
Economist Dr İris Cibre also noted that the programme had run its course, stating, “For three years, the system—which has relied solely on monetary policy without introducing any new, fundamental changes—has run its course. However, I do not believe there has been sufficient time to develop an exit strategy. Policies of this kind are applied for a period as a form of shock therapy. But you need to build strong institutional frameworks alongside them. These structures were not built during this process. That is why we are in a tight spot. In the short term, control still lies with the Central Bank… But the real sector will suffer even more,” she said.
Indeed, the data released last week revealed that the real sector is not in a particularly healthy state. The developments are as follows:
“They’re keeping loan interest rates high; our cheques and promissory notes aren’t being honoured”
TOBB President Rifat Hisarcıklıoğlu said, “Banks charge 60 per cent interest, but when raising rates they pass the increase on in a single day, whilst when lowering them they wait two months. They are keeping loan interest rates high. They are even making it difficult to utilise your existing credit limits. As a result, payments aren’t circulating in the market. Our cheques and promissory notes aren’t being honoured. We are calling on our banks to act more conscientiously,” he said, voicing the industrialists’ concerns.
Employment in the clothing and textiles sector has fallen sharply, with 153,000 people losing their jobs over two years
TEPAV’s April 2026 Employment Monitoring Bulletin revealed that, despite an increase in registered employment, job losses in the clothing and textiles manufacturing sectors have continued. Over the past two years, these two sectors have seen a loss of approximately 153,000 jobs.
The April 2026 Employment Monitoring Bulletin, prepared by the Turkish Economic Policies Research Foundation (TEPAV) using data from the Social Security Institution (SGK), showed that the upward trend in registered employment is continuing. According to the report, when workers covered by the Social Security Support Contribution (SGDP) are also taken into account, the total number of insured workers rose by 1.9 per cent compared to the same period last year, reaching 25,817,953. Compared to the previous month, 292,182 people were added to registered employment.
The number of workers in the manufacturing sector fell by 156,000
The total number of wage-earners in the manufacturing, construction and trade-services sectors rose by 0.5 per cent in May compared with the same month last year, reaching 15,970,105. On an annual basis, the number of workers in the manufacturing sector fell by 156,068.
According to TÜİK’s statistics on paid employees for May, the total number of paid employees across the manufacturing, construction and trade-services sectors – which stood at 15,892,187 in May last year – rose by 0.5 per cent compared with the same month last year, reaching 15,970,105. Employment thus reached its highest level since the 16,042,000 recorded in October 2025.
In May, the number of wage earners fell by 3.2 per cent in the manufacturing sector, whilst the construction sector saw a 1.2 per cent increase and the trade and services sector a 2.3 per cent rise.
Youth unemployment has exceeded 775,000: the 25–29 age group is the largest group of jobseekers
Youth unemployment continues to rise day by day. The number of young unemployed people registered with İŞKUR has exceeded 775,000. The 25–29 age group accounted for the highest proportion of jobseekers.
According to a report by Songül Dalgıç Bilgili of Nefes, İŞKUR data has revealed the scale of youth unemployment. According to June figures, 2,725,633 people registered with the agency are seeking work. In the breakdown by age group, the 25–29 age group took the top spot. Whilst 428,633 people in this age group were seeking work, they were followed by the 20–24 age group with 347,110 people. Next came the 30–34 age group with 338,171 people, and the 35–39 age group with 291,311 people.
Capacity utilisation in the manufacturing sector declined
According to the Central Bank’s Manufacturing Sector Capacity Utilisation Rate (CUR) data for July, the seasonally adjusted capacity utilisation rate fell by 0.5 percentage points compared with the previous month to stand at 73.8 per cent. The unadjusted capacity utilisation rate also fell by 0.6 percentage points over the same period to 73.9 per cent. This rate stood at 74.5 per cent in June.
When examined by product group, the capacity utilisation rate for consumer goods fell from 71.8 per cent in June to 71.4 per cent in July. For durable consumer goods, the rate fell from 67.9 per cent to 67.1 per cent, whilst for non-durable consumer goods, it fell from 72.6 per cent to 72.3 per cent.
In July, the lowest capacity utilisation rate was recorded in the leather sector at 58.7 per cent. The rate stood at 68.5 per cent for printing, machinery and equipment, and motor vehicles, whilst it stood at 67.9 per cent for other manufacturing sectors.
‘Capacity utilisation is at Covid-era levels’
Economist İris Cibre, analysing the capacity utilisation data, said: “The manufacturing sector’s capacity utilisation rate – both the headline figure of 73.90 per cent and the seasonally adjusted figure of 73.80 per cent – continues at Covid-era levels. “Are those who say ‘the industry is crying over empty capacity’ here?” she asked.
Iris Cibre continued: “An even more striking development lies hidden in the long-term trend; whilst the defence industry is operating at capacity usage levels in line with the rising trend, our other flagship sectors with high employment are moving at a level below even the downward trend. We are talking about a significant structural shift here. It is, of course, very positive that we have made such progress in the defence industry, but trends of this kind are not sustainable in the long term; you cannot grow indefinitely on defence alone. Other sectors are sliding rapidly downwards.”
Real sector confidence fell in July
According to the Central Bank’s Economic Trends Statistics and RKGE data for July, the seasonally adjusted Real Sector Confidence Index fell by 0.8 points to 101.2 in July. The annual CPI expectation for the end of the next 12-month period fell by 0.2 points compared with the previous month, standing at 31.3 per cent.
In July, 56.9 per cent of the businesses surveyed stated that there were no factors restricting their production, whilst 12.7 per cent reported that insufficient demand was the most significant factor limiting their production.
Oil prices tested the $100 mark before falling to $89
Oil prices reached the $100 per barrel threshold for the first time since May, due to the resurgence of violent clashes in the Middle East and the breakdown of the temporary ceasefire. Brent crude, the global benchmark, rose by more than 6 per cent on Thursday, testing the $100 mark. On Friday, however, it fell sharply to below $90 (89.50). Brent crude gained 12 per cent on a weekly basis. The key factors behind the sharp rise in oil prices are as follows:
Failed ceasefire and reciprocal attacks: It was reported that the temporary ceasefire agreed between the US and Iran had collapsed. The US’s intensification of military operations against Iran and reciprocal statements have pushed supply concerns in the markets to a peak.
Security crisis in the straits: Attacks by Houthi militias in Yemen on oil tankers in the Red Sea pose a direct threat to shipping routes through the Strait of Bab el-Mandeb and the Strait of Hormuz. Donald Trump’s statement that energy plants in Iran could be bombed in retaliation for attacks on ships in the Strait of Hormuz has further fuelled supply fears.
Logistics and supply risks: Risks in critical maritime chokepoints are leading to route changes in global maritime transport and a sharp rise in freight costs.
This surge in global oil prices, coupled with exchange rate volatility, is directly putting pressure on fuel prices in Turkey. Industry sources predict that in the coming days, diesel prices could rise to around 75 TL per litre, whilst petrol could reach levels of 66 TL.
Goldman Sachs: If the war continues, oil could reach $120 a barrel
Goldman Sachs forecasts that if shipping disruptions in the Strait of Hormuz persist, Brent crude could rise above $120 per barrel in the final quarter of the year. According to Goldman Sachs, it is significant that disruptions to oil flows through the Strait of Hormuz persist and that shipments from the Gulf of Basra remain below 45 per cent of pre-war levels; in this scenario, it forecasts Brent crude at $120. The investment bank expects that, should tensions in the region ease, Brent crude will trade at an average of $80 in the final quarter of the year and at $75 in 2027.
Central Bank keeps interest rate at 37 per cent
The Central Bank has kept its policy interest rate at 37 per cent. The Monetary Policy Committee also decided to keep the overnight lending rate at 40 per cent and the overnight borrowing rate at 35.5 per cent. The market had expected the bank to leave rates unchanged.
The CBRT’s next meeting will take place on 10 September.
“Leading indicators suggest the core trend will rise temporarily in July”
The statement regarding the interest rate decision included the following remarks: “The core trend of inflation declined slightly in June. Leading indicators suggest that the core trend will rise temporarily in July. As a result of increasing uncertainties amid geopolitical developments, energy prices have begun to rise again. Recent data indicate that the weak trend in domestic demand has become more pronounced. The effects of geopolitical developments on the inflation outlook via the cost channel, economic activity and the expectations channel are being closely monitored. “
We have been applying the second-highest policy interest rate for 26 months
Economist İnan Mutlu stated in a post following the interest rate decision: “We have had the world’s second-highest policy interest rate since May 2024. For exactly 26 months.”
The countries with the highest policy interest rates are, in order: Venezuela at 59 per cent, Turkey at 37 per cent, Zimbabwe at 30 per cent, Argentina at 29 per cent, and Nigeria at 26.5 per cent.
‘I am not certain that the rise in July will be temporary’
Prof. Dr Hakan Kara, former chief economist at the Central Bank, commented on the TCMB’s decision not to change interest rates: “The interest rate decision statement noted that the weakening of domestic demand has become more pronounced. In other words, an interest rate cut is still on the table, but only if the geopolitical situation allows it. The statement noted that the inflation trend is expected to rise temporarily in July. ‘I’m not sure of the informative value of the term “temporary”. The effects of rising energy prices may spill over into August to some extent. Even if there is a decline compared to July, the trend may still remain high,’ he commented.
Iris Cibre: A dovish tone emerged from the statement
Economist Iris Cibre commented on the Central Bank’s interest rate decision and the statement as follows: “A dovish tone emerged from the statement; it says, ‘demand has slowed, the deterioration in July is temporary, and I will cut rates at the first opportunity’ – and it is right to do so. It has emphasised the monthly trend (though the three-month average is rising) and stated that, whilst the trend has eased—albeit only slightly—it expects the main trend to rise ‘temporarily’ in July. It noted that ‘geopolitical developments and energy prices have entered an upward trend, but a weakening in domestic demand has become apparent’.”
S&P points to the fourth quarter for an interest rate cut
Ahead of the Central Bank of the Republic of Turkey’s interest rate decision on 23 July, forecasts from international organisations have begun to take shape. Andrew Birch, Deputy Director of European Economics at S&P Global Market Intelligence, predicted that the CBRT would maintain its policy rate and continue its ‘wait-and-see’ approach. He pointed to the fourth quarter of the year for a possible interest rate cut.
Birch commented, “A potential easing in inflation in July is not expected to immediately trigger a new cycle of interest rate cuts. However, if inflation continues to fall in the coming months, the Central Bank may begin to lay the groundwork for a possible interest rate cut in the fourth quarter.”
If you allocate 16 per cent of expenditure to interest payments, you cannot produce affordable food, nor can you eradicate poverty
Following the release of the June budget figures, economist İnan Mutlu conducted an analysis, noting that 15.6 per cent of total expenditure went on interest payments, 7.6 per cent on social security, 6.2 per cent to curative healthcare, 5.9 per cent to national defence and security, 5.2 per cent to basic education, 3.6 per cent to higher education, 2.7 per cent to agriculture, 2.5 per cent to poverty alleviation and social assistance, and 1.9 per cent to preventive healthcare.
He then wrote:
If you allocate 2.7 per cent of the budget to agriculture, you cannot afford cheap food.
If you allocate 2.5 per cent to poverty alleviation, you cannot eradicate poverty.
If you allocate 5.2 per cent to basic education, you cannot appoint teachers.
If you allocate 6.2 per cent to curative healthcare, you cannot eliminate queues in hospitals.
If you transfer 7.6 per cent to the social security system, you cannot provide pensioners with a monthly payment other than a pittance.
“The money paid in interest is 17 times what is deemed appropriate for 5.1 million pensioners”
In another post on the subject, Mutlu stated: “Budget expenditure is not a matter of capability, but of choice. The government is increasing the lowest pension by 3,552 lira for the second half of this year. Following this increase, the number of people receiving the lowest pension stands at 5.1 million. The additional cost this creates is 79 billion lira. So, how much interest does the government expect to pay in the second half of the year? 1 trillion 278 billion lira… 17 times the amount allocated to 5.1 million pensioners,” he said.
Prof. Dr Kara: If you produce little and consume a lot, inflation will not fall
Prof. Dr Hakan Kara, former chief economist at the Central Bank, emphasised that production must increase to bring down inflation, writing the following on his social media account:
“People often ask why inflation isn’t falling sufficiently even though the economy is slowing down. The answer is this: if you produce little and consume a lot, inflation won’t fall. By ‘little production’, I mean ‘inefficient’ production.
When assessing whether the economy is above its long-term trend or whether it has slowed too much and needs to slow further, it is essential to take into account the marked divergence between sectors. Whilst there is a significant production shortfall in industry, it is difficult to say the same for retail sales and services.”
Turkey leads by a wide margin in food and energy inflation…
When economist İnan Mutlu compared inflation in Turkey with other examples around the world, the results were “extremely painful”. He wrote: “Annual food inflation in the EU stands at 1 per cent. In Turkey, however, it is 35.5 per cent. If you add up the food inflation rates of 36 countries, the total comes to 33.3 percentage points.
As of June, the ranking of countries in Europe with the highest food inflation over the past year is as follows: Turkey 35.5, Romania 5.5, Georgia 5, Cyprus 4.8, Iceland 4.4, Kosovo 3.9.
Turkey also has the highest energy inflation among OECD countries… As of May, the ranking for energy inflation over the past year is as follows: Turkey: 45.0 per cent, USA: 23.5 per cent, Canada: 22.2 per cent, Sweden: 18.0 per cent, France: 16.1 per cent, South Korea: 12.5 per cent, Italy: 11.9 per cent, Australia: 11.2 per cent, United Kingdom: 7.4 per cent, Germany: 7.0 per cent.
Food inflation is very low even in arid African countries
According to economist İnan Mutlu, food inflation is much lower than in Turkey even in the African countries least suited to agriculture. As of June, annual food inflation stood at 35.5 per cent in Turkey, followed by Libya at 17.6 per cent and Nigeria at 7.5 per cent. In 19 African countries, food inflation ranges between 5.7 per cent and 0.1 per cent. In fact, in Senegal, Swaziland, Morocco, Mauritius, Burkina Faso, Togo, Benin, Chad and Niger, food inflation is negative… In other words, food prices are falling.
We are the 16th largest importer of luxury watches from Switzerland
A development is unfolding that confirms the claim that luxury watch imports rise during periods of rapid wealth accumulation and increased bribery. Between January and May, Turkey was the 16th largest importer of watches from Switzerland. This represents a 3.2 per cent increase compared to the same period last year and an 11.4 per cent increase compared to 2024. Countries such as Spain, Saudi Arabia, Canada and Qatar rank below us; in those markets, Swiss watches have found fewer buyers.
Reserves on the decline again: down to 160 billion 489.7 million dollars
The Central Bank’s total reserves fell by approximately 2.8 billion dollars compared with the previous week, reaching 160 billion 489.7 million dollars in the week ending 17 July. As a result, reserves have once again begun to decline. As of 17 July, the Central Bank’s gross foreign exchange reserves fell by 1 billion 697 million dollars to 65 billion 427 million dollars. Gross foreign exchange reserves stood at 67 billion 124 million dollars on 10 July.
Consumer Confidence Index at a 38-month high
According to the results of the Consumer Sentiment Survey conducted in collaboration between TÜİK and the Central Bank of the Republic of Turkey for July, the index rose by 2.2 per cent this month to 89.8, up from 87.9 in June. The index thus reached its highest level since May 2023. The index stood at 91.1 during the period in question.
Fitch left the rating unchanged, forecasting year-end inflation at 29.5 per cent
Credit rating agency Fitch Ratings affirmed Turkey’s credit rating at “BB-” whilst maintaining the outlook as “stable”. It was emphasised that Turkey’s potential growth rate is close to 4 per cent, with growth expected to be 2.8 per cent this year and 4.4 per cent next year, whilst inflation is expected to fall from 32 per cent in June to 29.5 per cent by the end of 2026.
It was noted that Turkey’s low public debt, large and diversified economy, high per capita income compared to the median of countries in the ‘BB’ rating group, track record of maintaining access to external financing during periods of stress, and resilient banking sector are among the factors supporting its credit rating.
If the war continues, the most pessimistic scenario is 1.9 per cent global growth
Indermit Gill, Chief Economist at the World Bank, said he had drawn up three different scenarios for the conflicts in the Middle East, adding that the worst-case scenario was coming very close to becoming a reality. Gill warned that should the US-Iran conflict drag on, global growth could fall from 2.9 per cent in 2025 to as low as 1.3 per cent, whilst inflation could rise to 4.5 per cent.
The chief economist said that should the war drag on and the region’s oil infrastructure be damaged, it would not only affect energy prices but also have a negative impact on the agricultural sector. In particular, disruptions to shipments of sulphur and helium – both used in fertiliser production – could drive up food production costs and global food prices.
A financial time bomb: the global debt mountain
According to the 2026 global public debt report compiled using IMF data, the US ranked first with a debt of 40.7 trillion dollars. Turkey ranks 27th globally with a total public debt of 418 billion dollars. With public debt exceeding 40.7 trillion dollars, the US is by far the world’s most indebted country, followed by China with 22. 2 trillion dollars, and Japan, with 8.9 trillion dollars.
In terms of the ratio of debt to economic output (GDP), Japan remains the country with the highest debt burden relative to its production capacity, ranking first at 204.4 per cent. Major economies such as the US (125.8 per cent), France (118.4 per cent), Canada (110.7 per cent) and the UK (103.6 per cent) also have debt burdens exceeding their national income…
Turkey ranks 27th globally with a total public debt of $418 billion.
The European Central Bank left interest rates unchanged
At its July meeting, the European Central Bank (ECB) left its three key policy interest rates unchanged, in line with market expectations.
It was reported that the refinancing rate was kept at 2.40 per cent, the deposit rate at 2.25 per cent and the marginal lending rate at 2.65 per cent.
The statement noted that the outlook for energy prices “remains highly volatile”, adding that prices were moving close to the levels forecast by the ECB. It highlighted that uncertainty remains high and that the full impact of the energy shock caused by the war in the Middle East on inflation has not yet materialised.
Oil giants to make billions of dollars in energy investment in Iraq
Oil giants BP and ConocoPhillips are preparing to make billions of dollars in new investment in Iraq’s energy sector. The announcements are expected to be made as part of the US-Iraq Business Summit to be held in Washington. It is anticipated that agreements and memoranda of understanding, with a total value exceeding 60 billion dollars, will be announced between US companies and the Iraqi government. It was stated that the agreements aim to increase the country’s oil production and reduce risks in regional energy routes.
Households in Northern European countries are not afraid of taking on debt
Eurostat data has overturned conventional wisdom about Europe’s economy. Whilst families in southern European countries with high public debt remain cautious, household debt (the total of mortgages, credit card debt, consumer credit and other debts) has reached record levels in northern European nations such as the Netherlands, Denmark and Sweden. In the Netherlands, which tops the list, the debt ratio has reached 93.5 per cent. The ranking is as follows: Denmark at 84.1 per cent, Sweden at 82.3 per cent, Finland at 62.9 per cent and Luxembourg at 60.5 per cent.
According to the latest Eurostat figures, the ratio of household debt to GDP in the European Union stood at 49.4 per cent in 2025. In the Eurozone, this ratio stood at 50.7 per cent. Both ratios were above 60 per cent in 2020. Consequently, a general downward trend in household debt has been observed in recent years.
Other news of the week is as follows:
- Turkey’s short-term external debt stock rose by 1.3 per cent in May compared with the previous month, reaching $172.7 billion. The short-term external debt stock, classified by remaining maturity, was calculated at $242 billion. The stock of short-term external debt attributable to banks rose by 3.9 per cent compared with the previous month, reaching $77.3 billion.
- According to TOBB data, the number of companies established in June rose by 26.1 per cent compared with the previous month, reaching 9,639. During the same period, the number of companies that closed increased by 58.9 per cent to 3,293.
- The Central Registry Agency (MKK) has begun publishing key data on Turkey’s crypto-asset market, which it records via its Crypto-Asset Central Registry System (KVMKS) service. The total number of investors who have carried out transactions on crypto-asset platforms to date has reached approximately 5.6 million.
- The Competition Authority has authorised the sale of a 42.8 per cent stake in Tekfen, owned by Can Kültür Sanat Eğitim Kurumları İşletmeciliği AŞ, to ON Investment, a subsidiary of OYAK.
- The initial public offering (IPO) market in Turkey gained momentum in 2026. Whilst 16 companies went public in the first half of the year, the total number rose to 24 with eight IPOs taking place in the first two weeks of July. This figure has already surpassed the number of IPOs in 2025.