The reality of Turkey's 2025 economic growth: Numbers are rising, but prosperity is stagnant

According to data released by the Turkish Statistical Institute, the Turkish economy grew by 3.6% in 2025. In the final quarter of the year, growth stood at 3.4%. Thus, the Turkish economy technically continued to grow, reaching a streak of 22 consecutive quarters of growth.

On paper, this picture might appear positive. However, the real question we must ask today is not about the existence of growth, but its quality. Is the Turkish economy truly strengthening, or are only the numbers growing? More importantly, which segments of society are benefiting from this growth? Is the growth balanced, sustainable, and inclusive?

Because the true meaning of economic growth is not merely an increase in macro data, but an improvement in the prosperity of broad segments of society. When examining the 2025 data, it is evident that the Turkish economy continues to grow. However, the composition of this growth indicates that a sustainable and inclusive development dynamic has not yet been established.

GROWTH BELOW POTENTIAL

The 3.6% growth rate is significantly below the potential growth rate of the Turkish economy, which is generally accepted to be around 5%. This situation indicates that the economy is not fully utilizing its capacity.

More importantly, however, is which sectors are driving this growth.

In 2025, the strongest contributions to growth came from;

• The construction sector

• Services sector

• Derived from financial and insurance activities.

In contrast;

• Growth in the industrial sector remained limited,

• While the agricultural sector continued to contract.

• The production method indicates construction-led growth, the expenditure method shows consumption-weighted expansion, and the income method reveals a distribution favoring capital.

This composition demonstrates that rather than a transformation that increases production capacity and productivity, a growth model weighted toward domestic demand and construction persists. However, sustainable development is possible only through value-added growth in industry, technological deepening, expansion in export capacity, and improvements and progress in every area of life—including the environment, education, health, and social life. The current picture does not provide a strong signal in this direction.

VOLATILE GROWTH BY QUARTERS IN 2025: There is Momentum, But No Structural Strengthening

In 2024, the construction sector served as the locomotive of growth, driven by post-earthquake reconstruction activities. When examining the 2025 data, it is evident that this trend largely continues. This situation brings back the question of whether growth is based on a cyclical recovery or a permanent structural transformation.

When the 2025 growth performance is examined by quarter, a volatile trend is observed.

First Quarter (2.5%): Growth was quite weak in the first quarter of the year. The erosion of purchasing power due to high inflation limited the sustainability of consumption-based growth.

Second Quarter (4.7%): A significant recovery occurred during this period. However, it is assessed that this increase was largely driven by base effects and a temporary revival in demand.

Third Quarter (3.8%): Growth momentum weakened again due to high interest rates and a slowdown in domestic demand.

Fourth Quarter (3.4%): In the final quarter of the year, consumption expenditures continued to support growth. However, this situation creates significant risks for household financial balances.

When the quarterly data are evaluated together, it is observed that growth in 2025 recovered after a weak start to the year. However, this recovery is not based on an industrial and export drive that permanently increases production capacity.

DISTRIBUTION OF GDP: Structural Distortions Behind the Numbers

Gross Domestic Product (GDP) is a holistic macro indicator that can be calculated using production, expenditure, and income methods. The production approach is the primary method used for calculations in Turkey. However, reading all three methods together reveals much more striking results regarding the quality and distribution of growth.

Data for 2025 shows that growth contains a clear imbalance in terms of sectors, expenditure items, and income distribution.

1) Structural Problems on the Production Front:  Construction-Centered Growth. 

The data for 2025 clearly reveals the divergence between sectors.

The agricultural sector contracted by 8.8% throughout the year. A 7.2% shrinkage was experienced in the final quarter, and the sector dragged overall growth down by 0.48 percentage points for the year. The uninterrupted contraction over the last four quarters indicates that drought, rising input costs, and structural problems are deepening. In an economy where agriculture is shrinking, it is not surprising that food inflation has become persistent. 

The industrial sector grew by 2.9%, but its contribution to growth was only 0.54 percentage points. The low performance of a strategic sector like industry shows that a production-based leap has not occurred. Industry, which accelerated in the second and third quarters of the year, slowed down significantly in the final quarter. This low performance of the strategically important industrial sector demonstrates that a production-based leap has not materialized.

The construction sector grew by 10.8%, becoming the fastest-growing sector of the year. Growing by 8.6% in the final quarter, the sector provided a 0.55 percentage point contribution for the year as a whole. Post-earthquake government-supported projects, housing demand, and investor interest in real estate have fueled this growth. However, a critical question arises here: Is construction-led growth increasing production capacity, or is it merely creating a short-term expansion in demand?

The services sector grew by 4.6%. The increase in tourism revenues is a positive development; however, the services sector alone is not producing a structural transformation that would close the foreign trade deficit.

The Information and Communication sector recorded 8% growth. It drew attention with an 8.9% increase in the final quarter. Being the fastest-growing sector after construction points to its potential for digitalization; however, the share of this field within the total economy remains limited.

Financial and Insurance activities grew by 3.8%. In a high-interest-rate environment, the strong profitability performance of the banking sector was notable.

Growth in 2025 has a composition that is weighted toward construction and services, limited in industry, and negative in agriculture. This picture clearly shows that a transformation based on production and productivity has not yet taken place.

2) GDP by Expenditure Method: Growth Driven by Consumption: 

Analysis using the expenditure method shows that growth is largely driven by domestic demand.

Household consumption expenditures increased by 4.1% and accounted for 54.4% of total GDP. This ratio indicates that more than half of the growth is consumption-based.

Government final consumption expenditures increased by 0.8% throughout the year, but contracted by 0.9% in the final quarter. The public sector's contribution to growth remained limited.

Investments increased by 7%. However, the main source of this increase is construction investments: Construction investments rose by 8.7%, while machinery and equipment investments increased by only 2.8%. The weakness in machinery investments, which increase productive capacity, limits future growth potential. This situation suggests that future growth potential may remain constrained.

Foreign trade data reveals a more striking picture: Exports decreased by 0.3%, while imports increased by 4.9%. Consequently, net foreign demand made a negative contribution to growth. In the final quarter, the decline in exports reached 2.3%. Net foreign demand contributed negatively to growth. This picture highlights the erosion of competitiveness, import dependency, and the difficulties the Turkish economy faces in foreign trade competition.

3) GDP by Income Method: Who Benefited Most from Growth?

Analysis using the income method clearly reveals the social distribution of growth.

In 2025, labor's share of the national income declined to 36.9%. In the final quarter of the year, this rate fell as low as 33.7%.

In contrast, capital's share rose from 43.1% in 2024 to 44.1% in 2025, reaching 49.1% in the final quarter.

While labor compensation increased by 40.4%, the net operating surplus grew by 44.2%. Even in nominal terms, the capital sector remains more advantaged.

This picture points to a clear reality: 2025 growth has functioned against labor and in favor of capital in terms of income distribution.

4) General Assessment: Numerical Growth, Structural Weakness

The production method indicates construction-centered growth,

The expenditure method indicates consumption-weighted expansion,

And the income method indicates a distribution in favor of capital.

It is difficult to speak of sustainable development while agriculture is contracting, industry is growing only limitedly, exports are weakening, and the labor share is declining.

It is impossible for Turkey to achieve permanent and inclusive growth without increasing its production capacity, strengthening machinery and equipment investments, enhancing export competitiveness, and improving income distribution.

Therefore, 2025 growth is technically positive; however, it is structurally fragile.

The numbers are increasing, but economic power is not spreading to the base.

GROWTH IN DOLLAR TERMS: Reality or Illusion?

According to 2025 data, the Turkish economy continues to grow, and per capita income appears to have increased significantly in dollar terms. However, how much of this increase stems from real production power, and how much is driven by inflation and exchange rate dynamics? While the numbers are rising, it is necessary to question the actual increase in economic prosperity.

According to data from the Turkish Statistical Institute, the 2025 Gross Domestic Product (GDP), calculated using the production method, increased by 3.6% in real terms compared to the previous year. GDP at current prices reached 63 trillion 20 billion 906 million TL, an increase of 41.3%. When calculated in US dollars, the total national income rose to approximately 1.6 trillion dollars, while per capita income was calculated at 18,040 dollars.

At first glance, this picture seems to indicate strong macroeconomic performance. However, the critical point here is to correctly evaluate the difference between nominal figures and real growth.

The Exchange Rate-Inflation Gap and 'Paper Wealth': In an economy where the inflation rate exceeds the increase in the exchange rate, the local currency appears to gain value in real terms. The high-interest rate policy implemented in 2025 and the associated capital inflows limited the rise in the exchange rate, while inflation remained at high levels.

This situation has led to two significant outcomes. First, GDP in Turkish Lira terms has increased rapidly due to high inflation. Second, because the rise in the exchange rate has lagged behind inflation, GDP in dollar terms appears to have risen faster than it actually has.

Therefore, a significant portion of the increase seen in national income in dollar terms does not stem from a real leap in production capacity, but rather from price level increases and exchange rate dynamics. For this reason, it is not always possible to establish a direct correlation between dollar-denominated growth and an increase in real prosperity.

The Leap in Per Capita Income: A Real Increase or a Statistical Reflection?: In 2024, GDP per capita was calculated at 507,615 TL and 15,463 dollars at current prices. In 2025, this figure rose to 712,200 TL and 18,040 dollars. While the Turkish economy grew by 3.6% in real terms during the same period, per capita income increased by approximately 17% in dollar terms.

The primary reason for this discrepancy is not a strong leap in productivity, but rather high inflation, a relatively suppressed exchange rate, and nominal income increases. Seeing double-digit growth in dollar terms while experiencing limited real growth in TL terms reflects a statistical effect created by price and exchange rate dynamics rather than structural enrichment.

The Population Issue in GDP Calculation: Another aspect to consider in per capita income calculation is the methodological dimension. When calculating GDP, the contributions of all individuals in Turkey who participate in production and create economic value are included in the total output. However, the definition of population used when calculating per capita income can be handled within a narrower framework.

The fact that the refugee population under temporary protection status does not reflect in the denominator to the same extent, despite their contribution to the production process, can lead to per capita income appearing higher than it actually is. In economic literature, such situations are considered among the factors that make it difficult for average indicators to fully reflect the true level of prosperity.

The Distance Between the Average and Reality: According to 2025 data, national income per capita was calculated at 18,040 dollars. However, this figure is merely an average; it does not directly reflect median income, income distribution, or purchasing power.

In economies where income distribution is distorted, average income may rise while the real prosperity of large segments of the population remains stagnant or even declines. While those who own financial assets benefit more from movements in exchange rates and asset prices, wage earners can become more vulnerable to inflation. For this reason, an increase in per capita income in dollar terms does not necessarily mean a corresponding increase in the purchasing power of the average citizen on the street.

Consequently, the real question is this: If growth is fueled not by productivity gains but by price increases, not by technological transformation but by exchange rate dynamics, and not by income justice but by average calculations; is the national income rising in dollar terms a true indicator of success, or is it a macroeconomic illusion?

The numbers may be rising. However, in an economy where a significant portion of workers earn at or near the minimum wage, the gap between growth rates and the cost of living is widening. The true meaning of economic growth is measured more by its contribution to the living standards of broad segments of society than by increases in statistics. If growth does not raise the purchasing power and quality of life of wage earners, numerical success does not translate into social welfare.

CONCLUSION: Figures are Growing, Prosperity is Not Increasing at the Same Pace

The 2025 growth data shows that the Turkish economy is technically continuing to grow. However, the quality and sustainability of this growth are seriously debatable. While the agricultural sector is shrinking, growth in industry remains limited and export performance is weak. Under these conditions, it is becoming difficult to speak of a production-based and sustainable development model.

The year 2025 has also been a period in which the differentiation between sectors has become more pronounced for the Turkish economy. While the construction and services sectors have been the main drivers of growth, the agricultural sector has experienced a significant contraction. The fact that growth relies heavily on consumption and construction investments, while industrial production and exports provide relatively limited contributions, reveals the fragile structure of the economy.

In terms of income distribution, the picture is even more striking. While labor's share of national income is decreasing, capital's share is increasing. This indicates that growth is not being shared equally among social segments.

On the other hand, per capita income appears to have increased by 17% in dollar terms in 2025, rising from $15,463 to $18,040. However, this increase is largely due to calculation parameters such as high inflation and the relatively horizontal course of the Turkish Lira against the dollar. Therefore, this rise does not fully reflect an increase in the real prosperity of broad segments of society.

The true success of economic growth is measured not only by statistical indicators but by the living standards of broad segments of society. If growth does not reflect in the citizen's income, purchasing power, and quality of life, rising figures alone are not enough.

The fundamental issue facing Turkey is not just growth, but the ability to implement a production-based, productivity-enhancing, fair, and inclusive growth model. This is because true development is possible only when prosperity is spread across the entire society, just as much as the economy grows.

In conclusion, the growth of numbers is not a success story on its own. The real success lies in establishing an economic order where growth is reflected in the citizen's table, pocket, and quality of life. Otherwise, growth remains in the statistics, while prosperity continues to be an elusive goal for a large segment of society.