Turkish economy - a chart that reads "Manufacturing, construction, and service sector growth slowed in Q3 2022"

Expect weaker demand into H1 2023, but opportunities in the market are still there

Turkey’s GDP grew 3.9% YOY, while contracting 0.1% on a quarterly basis in Q3 2022. These figures indicate a slowdown in the Turkish economy, which will continue into early 2023 and which the government is trying to prevent through lower interest rates and populist spending. MNCs will need to build their budgets on various scenarios for the country’s H2 2023 outlook, maintain competitive talent management strategies, and focus sales efforts on capturing pockets of resilient opportunities where possible. 


  • Weak investment outlook: As FrontierView expected, investments contracted in Q3, recording a negative 1.3% figure. This will likely remain in negative territory despite the central bank’s latest move to bring down interest rates to 9%. Larger firms are finding it hard to access credit, while smaller firms are accessing credit but using it for working capital rather than expansionary investments. 
  • Strong but easing exports: Export growth remained strong at 12.6% YOY in Q3, but eased from 16.4% in Q2. This easing should continue as economic activity and demand from Europe will be even lower in Q4 2022 and early 2023. 
  • Inflated consumption figures: The official real consumer spending figure shows a 19.9% YOY increase in Q3, easing slightly from the 22% average seen in H1 2022. FrontierView suggests caution when viewing these figures, as the low official inflation figure is artificially boosting the numbers. In nominal terms, consumer spending grew 129.4% YOY in Q3. While the official inflation figure during this period was 81.1%, other inflation forecasters point to 102% (Istanbul Chamber of Commerce) or 181% (ENAG – Inflation Research Group). When deflated by figures much closer to the inflation on the ground, consumer spending is more likely to have grown minimally. Yet, a strong increase in tourist arrivals, the inability of higher-income Turkish consumers to travel abroad, and increased service spending are supporting consumption. 
  • Rising government spending: Meanwhile, government spending increased to 8.5% YOY in Q3, from a mere 2% in Q2, as the government is raising public sector salary spending, subsidies, as well as procurement to maintain domestic demand. Such populist policies will continue until elections in Q2 2023.

Our View

MNCs will experience weaker demand broadly from consumers, businesses, and the government into H1 2023 compared to H1 2022. Customers have been under heavy inflation for over a year, the outlook for the country is highly uncertain, credit access is limited, and purchasing power is significantly lower. Growth will have to slow in 2023 if the economy is to avoid a crash. However, MNCs will see opportunities in more resilient customer segments, shifting purchasing behavior and needs, and periods of temporary boosts to confidence. Tourists, higher-income Turkish residents not traveling abroad, businesses that are in overperforming or still-exporting sectors, and local firms selling to the government will showcase better demand. Products that help businesses enhance efficiencies, allow consumers to experience affordable luxuries, and help the government save costs will see better demand.

At FrontierView, our mission is to help our clients grow and win in their most important markets. We are excited to share that FiscalNote, a leading technology provider of global policy and market intelligence has acquired FrontierView. We will continue to cover issues and topics driving growth in your business, while fully leveraging FiscalNote’s portfolio within the global risk, ESG, and geopolitical advisory product suite.

Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.