Turkey’s 2024 economic growth: Illusion or reality?

Although the Turkish economy recorded a growth rate of 3.2% in 2024, the extent to which this growth has benefited the broader public remains a subject of significant debate. Official data indicates that economic growth has been concentrated in specific sectors, while the public's purchasing power continues to decline and income distribution is increasingly deteriorating.

The fact that a large segment of society cannot sufficiently benefit from economic growth and development, and that the income levels of the poor are falling (becoming even poorer) in inverse proportion to economic growth, or rising below the average increase, also puts the sustainability of economic growth and development at risk. Criticisms regarding the quality, sustainability, and impact of growth on social welfare must be taken into account.

Turkey’s potential growth rate is approximately 5%. In other words, the 2024 growth remained below the country's potential. The locomotive of growth was once again the construction sector, partly due to reconstruction activities following the earthquake. Significant contributions are also notable from net taxes (increases in indirect taxes) and growth in the financial sector, which is the source of household credit-based consumption. The industrial sector has lost momentum, while agriculture presents a stagnant picture. A decline is observed in the state's final consumption expenditures and total investment expenditures.

Growth Performance by Quarter in 2024

According to data released by TURKSTAT, the growth performance of the Turkish economy in 2024 occurred as follows on a quarterly basis:

• First Quarter (January-March 2024): 5.4% growth was recorded. Growth based on consumer spending was far from sustainable due to the impact of high inflation.

• Second Quarter (April-June 2024): 2.4% growth occurred. Difficulty in accessing credit due to interest rate hikes suppressed consumption.

• Third Quarter (July-September 2024): 2.2% growth was seen. Tight monetary policies and falling domestic demand slowed the economy.

• Fourth Quarter (October-December 2024): 3.0% growth was announced. Despite high interest rates and falling purchasing power, consumption was maintained with difficulty.

These data show that growth, which appeared high at the beginning of 2024, gradually lost momentum in the later periods of the year. In summary, although economic growth may look positive at first glance, how this reflects on the daily lives of citizens is a separate subject of debate.

Distribution of GDP, Notable Issues, and Distortions

Gross Domestic Product (GDP) is estimated as an independent account that fully covers all sectors of the economy. There are three methods for GDP estimation: production, expenditure, and income. In Turkey, the production method is generally used in GDP calculations. When examining GDP growth figures calculated by the Production, Expenditure, and Income Methods, a serious imbalance emerges:

GDP by Production Method:

• A- The agriculture, forestry, and fishing sector grew by 3.9%. Due to drought and rising costs, the agricultural sector remained below its potential.

• BCDE- The industrial sector grew by 0.5%. High interest rates, rising production costs, import restrictions, and low domestic demand negatively affected industrial production.

• F- The construction sector grew by 9.3%. Public-supported projects, especially those stemming from the earthquake, the increase in housing demand, and the orientation of foreign investors toward real estate triggered growth in the sector.

• GHI- The services sector grew by 3.1%. The increase in tourism revenues stood out as a positive development.

• J- The information and communication sector grew by 3.4%.

• K- Financial and insurance activities grew by 4.9%: The large profits banks obtained, especially through high interest rates on consumer loans, drew attention.

GDP by Expenditure Method:

• Consumption of resident households grew by 3.7%.

• Final consumption expenditures of the government grew by 1.2%.

• Gross fixed capital formation grew by 3.9%.

• While exports of goods and services grew by 0.9% (global recession and reduced competitiveness suppressed exports), imports of goods and services shrank by 4.1% (falling domestic demand and high interest rates limited imports).

GDP by Income Method:

• The share of labor in national income fell to 35% in the last quarter of 2024.

• The share of capital in national income rose to 46.9% in the last quarter of 2024.

This situation shows that growth in Turkey largely benefits the capital segment, while workers are becoming increasingly impoverished. It demonstrates that growth is largely based on the construction and finance sectors, and that a growth model based on production and industry is gradually weakening. It is not possible for Turkey to achieve sustainable growth without increasing its production capacity, improving exports, and reducing import dependency.

Is the Increase in GDP and Income Per Capita in Dollar Terms a Success or an Illusion?

According to TURKSTAT data, the annual GDP obtained with the total of the four quarters of 2024 according to the production method increased by 3.2% in 2024 compared to the previous year. GDP at current prices according to the production method increased by 63.5% in 2024 compared to the previous year, reaching 43 trillion 410 billion 514 million TL. In terms of US Dollars, GDP was approximately $1.3 trillion. GDP per capita was calculated at 507,615 TL at current prices in 2024, and $15,463 in US dollars.

While Turkey grew by 3.2% in real terms in 2024, income per capita in dollar terms rose from $13,243 to $15,463. In other words, in Turkey, which grew by 3.2% in real terms on a TL basis, income per capita rose by approximately 17% in dollar terms. The main reason for this is that because inflation is very high in Turkey, GDP at current prices is rising rapidly. However, because the TL remains stable against the dollar or the exchange rate increase is far below the increase in inflation, GDP in dollar terms is also calculated as much higher than it should be.

On the other hand, while calculating GDP, the contributions of refugees who do business, work for wages, and contribute to production in Turkey are included in the GDP calculation, these individuals are not taken into account when calculating income per capita from GDP. In other words, some of those who contribute to the creation of the pie are ignored in the distribution of the pie. For this reason, income per capita calculations are calculated higher than they should be.

Minimum Wage, Hunger and Poverty Threshold, and Real Life

With the minimum wage becoming the average wage, high inflation, injustice in income distribution, and a constant decline in purchasing power, millions of our citizens struggling to survive on an insufficient income below the hunger-poverty threshold are deeply concerned. The net minimum wage, which was 17,002 TL in 2024, was increased by 30% to 22,104 TL in 2025.

According to the February 2025 report released by the TÜRK-İŞ Confederation: The monthly food expenditure amount required for a family of 4 to have a healthy, balanced, and adequate diet (HUNGER THRESHOLD) has risen to 23,324 TL, and the total amount of other monthly expenditures that must be made for clothing, housing (rent, electricity, water, fuel), transportation, education, health, and similar needs, along with food expenditures (POVERTY THRESHOLD), has risen to 75,973 TL.

The net minimum wage received by millions of our citizens, who are struggling with the minimum wage becoming the average wage, high inflation, the rising hunger-poverty threshold, and low purchasing power, has remained below the hunger threshold as of February 2025. These data show that millions of workers are living below the hunger threshold and are facing serious difficulties even in meeting basic living costs.

Conclusion: Injustice in Income Distribution, Who Grew?

The growth figures announced in 2024 do not mean anything for a large segment of the public. Although the Turkish economy grew by 3.2% in 2024, this growth did not reflect positively on employment growth and income distribution. Growth in favor of capital has increased income inequality, high inflation has reduced the public's purchasing power, and tight monetary policies have limited investments. When economic growth does not reflect on the working class and low-income citizens, it is not possible to talk about real development. Injustice in income distribution, high inflation, rising living costs, and lack of production reveal the fragile structure of the Turkish economy.

The Turkish economy grew by 3.2% in 2024, slowing down compared to the 5.1% growth in 2023, recording the lowest growth rate since 2020 and remaining below the potential growth rate. Among the main reasons for this slowdown in the growth rate are weak growth in household consumption (3.8% in 2024 against 13.5% in 2023), low increase in government spending (0.8% against 2.5% in 2023), and a slowdown in fixed investments (3.9% in 2024 against 8.4% in 2023). On the other hand, net trade supported growth; while exports increased by 0.9% (it had decreased by 2.8% last year), imports fell by 4.1% (it had increased by 11.8% the previous year), contributing to economic growth.

Economic development in a country can only be achieved through continuous and significant increases in income per capita. However, income per capita does not show how income is distributed. Development is also directly related to justice in income distribution. Turkey's injustice in income distribution poses a major risk for both economic growth and social peace. According to 2024 data from TURKSTAT, although there is some improvement in income distribution, inequality persists. As injustice in income distribution increases, underdevelopment and poverty also deepen. Unless economic growth is inclusive, it cannot be successful in reducing poverty and making income distribution fair.

While Turkey grew by 3.2% in real terms in 2024, income per capita in dollar terms increased by 17% from $13,243 to $15,463. The main reason for this increase is that GDP at current prices is rising rapidly due to high inflation in Turkey, but the TL remains stable against the dollar or the exchange rate increase is far below inflation. This situation creates an illusion by causing GDP in dollar terms to be calculated higher than it should be.

Although attempts are made to show growth figures as positive, the real question is: For whom is this growth happening? If the welfare of the broad masses of the public is not increasing, can economic growth have any meaning beyond figures on paper? The biggest economic problem facing Turkey is not just to grow, but also to ensure fair, inclusive, and sustainable growth. If policy changes are not made and structural measures are not taken to achieve this goal in 2025 and beyond, economic difficulties will continue for large segments of society.