Alarming Drop in Türkiye’s Industrial Performance Sparks Warning of ‘De-Industrialization’ Risk

Türkiye’s industrial sector is facing a critical turning point, according to Istanbul Chamber of Industry (ISO) Chairman Erdal Bahçıvan, who unveiled the findings of the “Türkiye’s Top 500 Industrial Enterprises 2024” report. He warned that key performance indicators point to a historic downturn, signaling a dangerous drift away from productive manufacturing.

“This data suggests that Türkiye is at risk of moving away from production,” Bahçıvan stated during the press briefing.

A Historic Decline in Three Core Industrial Metrics

The report highlights that for the third consecutive year, industrial firms experienced a real decline in net sales from production. While gross sales in 2024 climbed 36.3% to reach 8.7 trillion TL, the inflation-adjusted figure—using the domestic producer price index (D-PPI) at 41.1%—reveals a real drop of 3.4%.

Bahçıvan attributed this to waning domestic demand and sluggish export markets, both of which have limited industrial momentum despite nominal revenue growth.

Sharp Fall in Profitability Undermines Industrial Strength

The ISO 500 firms saw their operating profits plunge by 31.6%, falling to 641 billion TL in 2024. More concerning is the drop in profitability ratios:

• Operating margin declined from 10.4% to 6.2%

• Net profit margin fell from 7.1% to just 2.6%

According to Bahçıvan, this suggests that industrial companies are allocating nearly all their profits to cover financing expenses, leaving little room for investment or innovation.

Financing Costs Push Industry to the Brink

Financial expenses among ISO 500 firms rose 16% to 619 billion TL, while their ratio to operating profit soared to 96.6%, far above the 10-year average of 60.1%.

“The issue of access to finance has been on the agenda for years, but many industrialists still haven’t taken it seriously,” Bahçıvan noted, calling for better use of modern financial instruments and improved risk management strategies.

Industry Bears the Cost of Inflation

Bahçıvan criticized high interest rates, claiming that the industrial sector pays the highest price for an inflation problem it did not create.

“Despite contributing the most to the fight against inflation, the industry carries the heaviest burden from interest hikes,” he said.

Confidence in the Medium-Term Economic Plan

Expressing faith in Türkiye’s Medium-Term Program (OVP), Bahçıvan emphasized that the industrial sector is meeting its obligations.

He highlighted that core goods inflation fell dramatically—from 53% to 20.3% in the past year—while services inflation remains elevated at around 55%, suggesting that industrial reforms are showing early signs of impact.

VAT and Debt Burdens Mount

The accumulated VAT burden on ISO 500 companies surged 26.9%, reaching nearly 85 billion TL, which Bahçıvan equated to interest-free credit lent to the state.

Meanwhile, total corporate debt rose 45.1%, with:

• Financial debt up 38.6%

• Other liabilities increasing by 51.5%

Firms are increasingly shifting toward non-bank borrowing due to rising credit costs.

The Threat of De-Industrialization and the Need for High-Tech Transition

Bahçıvan underlined the urgent need for a shift toward high-tech manufacturing, warning that:

“A Türkiye that drifts away from production cannot sustain growth or compete globally. Industry is the backbone of our economic, strategic, and social structure.”

Foreign Investment and Tech-Led Growth Offer Hope

On a brighter note, Bahçıvan welcomed the growing number of foreign-capital firms in the ISO 500, particularly those investing in high-tech and export-oriented sectors. He noted that the Chamber expects a greater role for technology-intensive production models in the near future.

“Technology and innovation are essential pillars for industrial recovery,” he concluded.