Economic Expert: Turkey faces economic crisis

The Turkish economy is suffering from accelerating inflation and declining purchasing power, with inflation rates recently exceeding 75% after previously reaching such levels. The roots of this crisis include an excessive current account deficit, external debt accumulation, and past monetary policies related to interest rates.

Economist and academic Prof. Dr. Mustafa Durmuş, in an interview with our agency, discussed the state of Turkey’s economy, government strategy, living conditions, wage and unemployment crises, as well as the impact of wars and tensions in the Middle East on the Turkish economy. Among the main challenges are rising inflation, declining purchasing power, increasing cost of living, and rising unemployment.

• How do you assess the overall situation of the Turkish economy?

A real crisis facing the country

The Turkish economy has been undergoing one of its biggest crises since 2015. The average per capita income in 2025 is now lower than it was ten years ago. This is due to government policy that relies on keeping the dollar exchange rate artificially low, thereby making the lira appear stronger than its real value. This leads to higher nominal per capita income on paper only, while real income does not exceed $17,000 annually, reflecting a clear decline in living standards over the past decade.

The second issue is Turkey’s high inflation rate, as it ranks first in Europe and second among OECD countries (after Argentina) in terms of inflation rates, which increases poverty and economic instability.

The third weakness of the Turkish economy is the existence of two major deficits: the current account deficit and the public budget deficit. The current account deficit means that export and tourism revenues are no longer sufficient to cover import bills, making the economy increasingly dependent on short-term foreign capital inflows.

The danger lies in the possibility that any decline in these inflows—due to economic, political, or geopolitical reasons, or capital outflows—could push Turkey into a foreign currency crisis, as happened during the 2018 crisis involving U.S. pastor Andrew Brunson.

The public budget also suffers from a large deficit due to high spending on debt interest, military projects, and capital support, which threatens Turkey with a serious financial crisis.

• What economic strategy is the current government following?

The Turkish government is attempting to address the consequences of the crisis rather than its root causes. This is due to its reliance on an “interest trade” policy to prevent exchange rate instability.

It offers high interest rates to attract foreign capital, while at the same time imposing restrictions on the foreign exchange market, leading to inflows of so-called “hot money.” This is a costly policy, as the central bank is forced to continuously sell foreign currency to stabilize exchange rates, which depletes its reserves. Rebuilding these reserves also comes at a high cost.

Ultimately, this policy—both domestically and internationally—generates profits for large financial speculators, while further impoverishing ordinary citizens.

What is the economic situation in Turkey? And why do living costs and prices keep rising?

The standard of living in Turkey—especially among workers, farmers, and small business owners—has been in a systematic decline over the past ten years. This is due to citizens being burdened with debt resulting from taxes imposed by the government and its economic policies.

High inflation and rising unemployment are worsening social conditions, while government budget policies against workers are expanding poverty. Income distribution is also highly unequal, not only between labor and capital but also between regions of the country. For example, the average income in the provinces of Hakkari, Ağrı, and Muş does not exceed one-third of the national average.

• Despite regular increases in minimum wages and public salaries, citizens say: “We are poorer than last year.” What are the reasons?

Current wages are not enough to secure a minimum standard of living

Whenever inflation rises in Turkey, the real value of wages and incomes declines. The minimum wage has lost around 4,000 Turkish lira in real value during the first five months of this year, while retirees have lost nearly 3,000 lira in purchasing power. Today, workers and retirees are experiencing poverty levels not seen before in the country.

The problem is not only inflation, but also low wage levels, which make it impossible for citizens to meet basic needs even when inflation slows down.

The minimum cost of living for a family of four is estimated at 35,000 Turkish lira, while the poverty line ranges between 114,000 lira (as stated in the text). The core issue is low wages, mainly due to income distribution, where wage earners receive only one-third of national income, while the remainder goes to capital and the state.

Addressing the crisis is not limited to reducing inflation; it also requires raising wages to ensure a dignified standard of living for families, along with policies that support workers and organized struggle by the working class.

Overall unemployment rates are between 8% and 9%, while youth unemployment exceeds 20%.

• Why are young people unable to find jobs?

Unemployment has become a deep social wound and a chronic problem. Although official figures state around 5.3 million unemployed people, the real number exceeds 11 million.

The official “narrow definition” unemployment rate is reported at 2.8%, but the real rate is closer to 30%, which is among the highest in Europe.

Youth unemployment has reached dangerous levels, with one in every three young people of working age unemployed, and around 28% of youth neither working nor continuing their education.

Female unemployment is twice as high as male unemployment, reflecting discriminatory and unequal state policies toward women.

Out of every 100 working-age women, only 28 are employed, which highlights the extent of marginalization and discrimination faced by women in Turkey.

·Do wars and crises in the Middle East affect the Turkish economy?

The ongoing wars and conflicts in the Middle East have had a direct impact on the Turkish economy. This is clearly visible during the wars in Syria and Gaza, as well as the Iran–Israel conflict.

In particular, the rise in oil and fertilizer prices has led to higher costs for energy and food commodities, which has in turn reflected on the prices of goods and services and pushed inflation rates upward.

On the other hand, linking high inflation in Turkey solely to wars is not accurate. Countries experiencing wars such as Israel, Russia, and Ukraine have inflation rates that are only five to ten times lower than Turkey’s, which indicates that internal factors play a much more influential role.

The main causes of inflation in Turkey include rising exchange rates due to incorrect interest rate policies, the depreciation of the Turkish lira, and the heavy reliance of production and export sectors on imports. Other contributing factors include pre-election credit expansion and expansionary monetary and fiscal policies.

In addition, large profits made by banks—reportedly increasing by around four times—along with price hikes by large retail chains and rising security expenditures have all contributed to worsening inflation.

The political authority also uses inflation as a tool to transfer wealth from poorer segments of society to richer ones, as well as an indirect means of increasing tax revenues.

• Final word?

Wars not only cause casualties, environmental destruction, and increased displacement, but also inflict serious damage on economies. A democratic and peace-based project is the only path that can open new horizons for the country.

ANHA