Turkey Economy Grew 2.3% — September 2026 Bulletin

İTOSAM — Weekly Economic Bulletin | 4 September 2026

Translation and analysis of the Istanbul Chamber of Commerce economic bulletin

İTO Center for Strategic Studies — period 31 August to 4 September 2026

Covered: annual and quarterly GDP, international trade in services, indirect R&D incentives, labour force statistics, TÜİK and İTO inflation, manufacturing PMI and the SAMEKS index

1. Annual GDP — 2025

"Turkey's economy grew 3.7% in 2025"

GDP by chain-linked volume index grew 3.7% in 2025 against the previous year. On the production approach at current prices, GDP rose 41.6% to TL 63 trillion 240 billion 524 million. GDP per capita at current prices was TL 714,682, or USD 18,103.

Sectoral growth in 2025

Construction was the fastest-growing sector of 2025 at 11.0%, followed by culture, arts, entertainment and recreation at 8.5% and information and communication at 7.9%. Against this, agriculture, forestry and fishing contracted 8.5% and water supply, sewerage and waste management contracted 5.0%. By share of GDP, manufacturing held the largest share at 15.6%, followed by wholesale and retail trade at 12.9%.

The single most important point in this bulletin for you: construction was the fastest-growing sector of the economy in 2025 at 11.0%, but in Q2 2026 (section 2 of this document) it contracted 1.9%. That is a complete reversal in under two quarters, and it aligns exactly with the monthly data we saw in the 14 August bulletin (construction output down 6% year on year). 2025 was the peak of the cycle; 2026 is the correction.

Note also that real estate grew only 1.5% in that same boom year — less than half the growth of the economy as a whole. Even in the peak construction year, the transaction and property-services side took no share of the boom.

Expenditure components

Final consumption expenditure of resident households grew 4.2% in 2025, bringing its share of GDP to 54.4%. Gross fixed capital formation grew 7.3%, taking a 30.7% share. Government final consumption expenditure grew 1.0%. Exports of goods and services fell 0.6% while imports grew 4.6%; with that shift, the export share reached 24.7% and the import share 25.0%.

Structural change over five years: the export share of GDP has fallen from 38.1% in 2022 to 24.7% in 2025 — a drop of 13.4 percentage points. Over the same period the household consumption share rose from 52.9% to 54.4%. Turkey's growth engine has shifted from exports to domestic consumption. This is the same mechanism that produces the current account deficit and the lira overvaluation the IMF estimated at 12.1%. Consumption-led growth without an export base depends on capital inflows.

2. Quarterly GDP — Q2 2026

GDP grew 2.3% in Q2 2026 against the same quarter of the previous year. The chain-linked volume index adjusted for seasonal and calendar effects rose 1.1% against the previous quarter. At current prices, Q2 GDP grew 36% to TL 19 trillion 869 billion 747 million; the dollar value for the first quarter was USD 438 billion 347 million.

The trend is unambiguous: from a peak of 4.8% in Q2 2025, growth has gone to 3.9, then 3.5, then 2.6, and now 2.3% — four consecutive quarters of decline. The 1.1% quarterly (adjusted) growth means the economy is not yet in absolute contraction, but its momentum is steadily draining.

Expenditure components in Q2 2026

Final consumption expenditure of resident households grew 3.5%. Government final consumption expenditure fell 1.8% and gross fixed capital formation grew only 0.6%. Exports of goods and services fell 3.4% and imports of goods and services fell 6.4%.

Sectoral growth in Q2 2026

By sector, agriculture, forestry and fishing showed the strongest growth at 13.3% and information and communication activities grew 8.6%. Public administration, education, human health and social services grew 4.0%, taxes on products less subsidies 3.3%, and other service activities 3.2%. Industry grew 2.4%, financial and insurance activities and real estate activities 2.1%, and professional, administrative and support service activities 2.0%. Trade, transport, accommodation and food services recorded limited growth of 0.5%, while construction contracted 1.9%.

Investment has stopped. Gross fixed capital formation grew 7.3% in 2025, but only 0.6% in Q2 2026 — effectively zero. With inflation at 31.5%, real investment is shrinking. For construction, which is the direct output of fixed investment, this means the pipeline of new projects is drying up — exactly what we saw last week in the fall in registered contractor orders (from 82.1 to 78.9).

3. International trade in services — 2025

Services exports grew 6.5% to USD 124.9 billion, while services imports grew 9.6% to USD 61.9 billion — a services surplus of USD 63.0 billion. On the balance-of-payments broad services classification, travel services accounted for 48.1% of total exports, followed by transport services at 34.1% and other business services at 6.3%.

Transport services exports grew 3.5% to USD 42.5 billion. Telecommunications, computer and information services exports grew 25.3% to USD 6.7 billion. On the import side, transport led with a 32.0% share, followed by other business services at 16.9% and travel at 14.5%.

EU countries were the largest group in Turkey's non-travel services exports and imports: 37.9% of total services exports and 45.3% of total services imports. In services exports, the United States ranked first with a 12.9% share and USD 8.3 billion, followed by Germany at 11.5% and the United Kingdom at 6.6%. In services imports, Ireland led at 12.6%, followed by the United Kingdom at 9.1% and the United States at 8.3%.

The full external balance picture: a goods deficit of USD 76.5 billion against a services surplus of USD 63.0 billion. Services therefore offset 82% of the goods deficit, and tourism alone is close to half of that surplus. The vulnerability sits here: half of Turkey's external-balance defence rests on a single seasonal, geopolitically sensitive sector.

Growth note: telecommunications and information technology is the fastest-growing services export sub-sector at 25.3% — though at USD 6.7 billion it is still small.

4. Indirect R&D incentives — 2025

Total tax incentives for R&D activities rose 59.5% from TL 105 billion 977 million in 2024 to TL 169 billion 33 million in 2025. The largest support firms benefited from was the withholding income tax exemption at TL 86 billion 105 million. This was followed by corporate tax at TL 81 billion 63 million, income tax at TL 1 billion 725 million, and VAT at TL 141 million.

Of the 11,835 firms that used these incentives in 2025, 89.5% were small and medium-sized enterprises, concentrated mainly in information and communication, manufacturing, and professional, scientific and technical activities. With TL 64 billion 596 million of support, their benefit rate was 38.2%, of which 61.1% went to medium-sized firms, 32.1% to small and 6.8% to micro. Large firms made up 10.5% by count but took 61.8% of total incentives.

Severe concentration of support: 10.5% of firms (large) take 61.8% of the incentive, and 44.9% of firms (micro) take just 2.6%. For a small company this means the R&D incentive system is effectively out of reach — not because it is barred, but because of administrative cost and the entry threshold. The practical point, though, is that only 11,835 firms nationwide use these incentives — a very small figure against roughly 4 million active firms. For companies with design, software or engineering activity, this is a low-competition route.

5. Labour force statistics — July 2026

On the household labour force survey results, the number of unemployed aged 15 and over rose by 150,000 against the previous month to 2,860,000. The seasonally adjusted unemployment rate was 8.1%. Over the same period, the number of employed fell by 388,000 against the previous month to 32,362,000. The employment rate fell 0.6 points to 48.3%.

The unemployment rate in the young population (15–24) was 14.5%; 20.3% among women and 11.3% among men. The composite measure of labour underutilisation, adjusted for seasonal and calendar effects, rose 1.8 points against the previous month to 30.6%.

The worst data in this bulletin: 388,000 jobs lost in a single month and the labour underutilisation rate jumping to 30.6% — meaning roughly a third of the country's potential workforce is either unemployed, underemployed, or has given up looking. The official 8.1% unemployment rate conceals this reality. Youth unemployment rose 1.5 points in one month. These figures form a single narrative with the PMI contraction, the fall in construction orders and the halt in investment.

6. TÜİK inflation — August 2026

The consumer price index rose 1.84% month on month in August and 31.51% year on year. The domestic producer price index rose 2.57% month on month and 27.95% year on year.

The divergence is worsening: monthly producer inflation (2.57%) is now 0.73 points above consumer inflation (1.84%) — last month the gap was only 0.26 points, and in the opposite direction (1.52 against 1.78). On an annual basis too, D-PPI has risen from 25.16% a year ago to 27.95% while CPI has fallen from 32.95% to 31.51%. Production costs are rising faster and the ability to pass them on to the customer is shrinking — margin compression, quantified.

Within the CPI main groups, the largest annual change was 53.44% in education, followed by 43.46% in health. In monthly changes, the largest increase was 8.62% in education, and the only declining group was clothing and footwear.

On the producer side, the largest monthly increase was 6.99% in energy, followed by electricity, gas and steam at 6.03%. The only declining group was mining and quarrying.

Energy, three months running: electricity, gas and steam was 9.65% monthly in early August, now it is 6.03% and energy 6.99%. This is no longer a temporary spike — it is a trend. Transport in the CPI, at 4.82%, made the largest contribution (0.82 percentage points) to monthly inflation, which is a direct reflection of those same fuel prices.

7. İTO inflation — Istanbul, August 2026

The Istanbul consumer price index rose 1.66% month on month in August and 34.96% year on year. In monthly group changes, education jumped 17.28%, followed by alcoholic beverages and tobacco at 8.22%. No price change was recorded in the health group, and clothing and footwear fell 0.08%.

The wholesale price index, which reflects movement in wholesale prices, rose 2.55% monthly and 25.07% annually. In monthly group changes, unprocessed materials rose 7.29% and no change occurred in the textiles group. Construction materials rose 1.99% and fuel and energy 2.75%.

Two points for Istanbul. First, Istanbul's annual inflation of 34.96% against the national 31.51% — the same 3.5-point gap as the previous month, which makes it a persistent divergence rather than a fluctuation. Second, construction materials in wholesale rose 1.99% monthly — still below the general index (2.55%), but the gap is narrowing. The cost advantage in materials is eroding.

8. Turkey manufacturing PMI — August 2026

The headline index rose from 47.7 in July to 48.1 in August — the highest level in three months, but still below the 50 threshold and indicating continued contraction. Weak demand conditions and market uncertainty arising from the Middle East war maintained their effect.

Producers cut output for the third consecutive month, though August's slowdown was mild and close to the previous month. Weak workloads pushed firms to reduce employment and purchasing, and the fall in both indices was more pronounced than in July. Firms preferred to meet orders from warehouse stock, which led to declines in both input and finished-goods inventories.

Input price inflation reached its highest level in three months on rising fuel and raw material costs. Firms raised selling prices accordingly; output price inflation accelerated but remained below the January–June average. War-related disruptions lengthened supplier delivery times.

A significant deterioration: the previous month three sub-sectors were above the threshold (clothing and leather 54.2, electrical and electronic 52.5, non-metallic mineral 50.3). This month all 10 sub-sectors are below 50. Clothing and leather fell from 54.2 to 47.4 — a 6.8-point drop in one month. Non-metallic minerals (cement, glass, ceramics — direct construction inputs) fell back from 50.3 to 49.4, meaning the earlier return of construction demand did not hold.

The sharpest weakness is in chemicals, plastics and rubber (43.7) and textiles (44.1). One further negative: input price inflation has accelerated again after three months of slowing.

9. SAMEKS index — August 2026

The SAMEKS composite index rose 0.8 points in August to 50.3, crossing the 50 threshold. Among the sub-indices, the industrial sector index fell 2.0 points to 51.6 — still above the threshold — and the services sector index fell 0.2 points to 48.1.

In industry, the production sub-index fell 9.5 points to 46.0, while the supplier delivery times sub-index rose 6.2 points to 55.9. The input purchasing sub-index fell 3.9 points to 55.9 and new orders fell 0.5 points to 52.6. In services, the inventory sub-index fell 5.0 points to 43.3 and the employment sub-index fell 1.5 points to 48.2. The business volume sub-index rose 0.6 points to 45.4 and input purchasing fell 0.6 points to 52.6.

Above the threshold, but on poor quality. The composite index has gone above 50 while the industrial production sub-index has collapsed 9.5 points to 46.0. What is holding the index up is the 6.2-point rise in supplier delivery times — and in PMI methodology, lengthening delivery times enter the index as a positive signal (an indicator of strong demand), whereas here they are the result of war disruption, not of boom. The index crossing 50 is therefore more a statistical artefact than an improvement.

10. Analytical summary

a) The construction cycle has turned

Construction was the fastest-growing sector of the economy in 2025 (11.0%), turned negative in Q2 2026 (−1.9%), and its monthly output is down 6% year on year. Gross fixed capital formation has gone from 7.3% annual growth to 0.6% quarterly. Contractor orders are falling and sector confidence sits at 83.1 — the most pessimistic sector in the economy. Four independent data points produce a single conclusion.

b) The labour market is breaking

388,000 jobs lost in a single month, a labour underutilisation rate of 30.6%, youth unemployment at 14.5%. This typically transmits to housing demand with a six-to-nine-month lag — particularly in the credit-dependent consumer buyer segment.

c) Cost pressure has accelerated again

D-PPI at 2.57% monthly against CPI at 1.84%; energy at 6.99%; PMI input inflation at a three-month high. For fixed-price contracts, this month is the worst possible combination: high cost, low pass-through power.

d) Practical implications

Price new projects against D-PPI, not CPI. A 0.73-point monthly gap becomes a multi-percentage-point gap over a year.

Construction materials are still below general inflation but the gap is closing (1.99 against 2.55%). Forward purchasing of materials for defined projects is more rational today than in three months' time.

Tourism is the economy's hidden strength. 48.1% of services exports and close to half of the USD 63 billion surplus — for residence and short-stay projects, it is the only segment the macro data supports.

The R&D incentive is a low-competition route. Only 11,835 firms out of roughly 4 million active firms use it. Worth examining for in-house design, engineering and software activity.

The export share of GDP has fallen 13.4 points. This means structural pressure on the lira continues; for long-term foreign-currency commitments, hedging remains a question for today, not tomorrow.

This document is a translation and analysis of the İTO Center for Strategic Studies (İTOSAM) weekly economic bulletin dated 4 September 2026. Data is drawn from the sources cited in the bulletin (TÜİK, İTO, İSO, MÜSİAD).