Turkish economy expands but agriculture takes a hit

• Financial services help Q3 result
• 3.7% growth, down from Q2
• Drought cut agricultural production

Strong growth in construction and financial services drove expansion in the Turkish economy during the third quarter of 2025 but weakness in agriculture slowed momentum, data released by the state statistical agency on Monday showed. 

Turkey’s economy expanded by an annualised 3.7 percent in the third quarter, down from 4.9 percent in the second quarter, according to Turkstat. 

Robust construction and an 11 percent increase in banking and financial services bolstered growth. 

Hikmet Baydar, an economist with 3. Göz Consultancy, said the data is unlikely to have a major impact on foreign investor sentiment, adding that a stronger figure such as 4.5 percent is needed. 

“The growth figure came within market expectations and overall will not have a negative impact on the market,” Baydar told AGBI. 

Baydar said the growth result is better than 2024 but only around half the 6.5 percent of 2023. “Growth is very important for Turkey because a low growth figure could trigger unemployment and domestic inflation,” Baydar said.

Turkey is struggling to bring down unemployment. The jobless rate was 8.5 percent in October, the same as two years earlier, with youth unemployment almost twice the average at 16 percent. 

Growth would have been stronger but for a sharp contraction in agriculture and primary production, which shrank more than 12 percent mainly as a result of a severe drought across much of the country in the second and third quarters. 

This contraction will flow into consumer prices, which were up 33 percent annually in October, well above the central bank’s year-end target of 24 percent, Baydar said. Prices of agricultural commodities are likely to rise amid constrained supply.

“What catches my attention the most is the narrowing in agriculture, forestry and fishing which negatively impacts inflation and shows how difficult it will be to lower inflation,” Baydar said.

Further reading:

• Turkey signals tax-and-spend spree with 2026 budget
• Turkey to spend $600m to counter ‘new normal’ climate
• Arda Tunca: Turkey’s growth numbers are misleading investors

Treasury and finance minister Mehmet Şimşek told investors in London last month that the 2025 inflation target is likely to be missed. Instead, year-end inflation is expected to be around 31 percent, Şimşek said. 

Persistently high inflation may make it hard for the central bank to carry out any sizeable reduction in its main lending rate, currently 39.5 percent. The central bank’s policy committee is due to announce its latest rate decision on Wednesday. 

The lira-denominated BIST 100 index of the Istanbul stock exchange traded up 1.5 percent at 11,044 on Monday, up 12 percent in the year to date.