Turkey's private sector slows ahead of elections. A chart that reads "Industrial Production (%YOY) showing a spoke in March and a sharp decrease by July. The chart then events out continuing through September.

High costs and muted investment will restrain growth until H2 2023

B2B demand will remain muted for the next 5–6 months, before potentially rising if election results can give confidence to executives. Price sensitivity, demand for extensions of payment terms, and risk of defaults will need to be managed in the customer chain. FMCG firms should also monitor the risk of rising unemployment if the environment of muted investment and high costs continues.


  • Industrial production entered negative territory in November 2022, contracting 1.3% YOY. 
  • Export growth slowed from double digits in early 2022 to 2.1% YOY growth in November 2022.
  • The capacity utilization rate also eased from the 78 range in early 2022 to 76 in November. 
  • Credit growth to non-financial corporations grew 50.9% YOY in November, significantly lower than the inflation rate, which was likely hovering above 100%, indicating a contraction in real terms.

Our View

Private sector growth will remain weak in Turkey until H2 2023. Uncertainty in the political and economic policy outlook into the post-election period is leading executives to take a wait-and-see approach. Combined with the restricted access to credit, this is limiting investments in early 2023. Meanwhile, high business costs continue to reduce profitability and thus expansionary investments from firms. Producer prices averaged above 150% YOY in 2022, and while official numbers have declined to slightly below 100% in the latest figures, operating costs remain significantly high. Added to this is the rise in wage costs for the industrial and service sectors. Companies are facing pressure to increase wages at least around 50% as a result of minimum and public sector wage increases. Lastly, the unpredictability of demand is also complicating operations for businesses. Future FX depreciation and inflation concerns are, at times, causing consumers and producers to pull forward purchases, but in many instances, purchasing hesitancy, price sensitivity, and trading down have been driving behavior patterns.

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