Güldem Atabay: Time to Talk About an Industry-Focused, Tech-Driven Growth Initiative

Recent macroeconomic data offers a clearer picture of the impact, cost, and outcomes of Turkey’s ongoing economic program.

Slowing Growth and a Fragile Real Sector

Turkey’s quarter-on-quarter GDP growth dropped significantly from 1.7% in Q4 2024 to 1.0% in Q1 2025. Within this period, the agricultural sector contracted by 2.8%, while manufacturing showed almost no growth at 0.1%. These figures starkly reflect the toll of Finance Minister Mehmet Şimşek’s policy framework on the real economy. Meanwhile, construction expanded by 2.2%, and services grew 0.8%, revealing how capital allocation has shifted toward less productive sectors.

Labour Market Worsens as Broad Unemployment Hits 32%

Turkey’s broadly defined unemployment rate surged to 32.2% in April, up from 28.8%, suggesting that nearly one in every three people is either unemployed or too discouraged to seek work. Despite a modest increase in the working-age population (+43,000), both the labor force (-114,000) and employment (-316,000) shrank, pushing the headline unemployment rate from 8.0% to 8.6%.

Industry Shrinks for the 14th Straight Month

The Manufacturing PMI dropped to 47.2 in May, deepening its contraction for the 14th consecutive month. The index has now been in contractionary territory for over a year, indicating prolonged stagnation in industrial output.

Unequal Burden of Disinflation

These indicators paint a troubling picture: while inflation is slowly and marginally retreating under Şimşek’s policies, the burden falls disproportionately on wage earners and industrial producers. In contrast, the public sector, construction industry, and financial services are less affected and continue to expand.

Since 2023, Turkey’s economic plan has relied on aggressive interest rate hikes and tight credit conditions to suppress domestic demand and strengthen the Turkish lira in real terms—aiming to curb inflation. However, this approach has failed to improve public spending efficiency, a crucial missing link in achieving balanced disinflation.

Industrial Share in GDP Shrinks Sharply

A critical casualty of this approach is the industrial sector. In the first quarter of 2023, industry accounted for 25.3% of GDP. By the first quarter of 2025, this had fallen dramatically to 19.2%. Agriculture’s share slipped from 2.6% to 2.2%, while construction rose from 5.4% to 6.2%, and public spending jumped from 13.6% to 15.5%.

“Losing Muscle, Not Fat”

As many economists observe, Turkey is losing muscle, not fat—indicating a harmful erosion of productive capacity rather than excess demand. A true stabilization program should enhance productive output and raise living standards, not suppress growth indiscriminately. But Şimşek’s finance-centric policies miss this goal, generating severe social and economic side effects.

Industry Pushes Back, Government Responds With a Buzzword Campaign

Warnings and complaints from the real sector—especially major industry and trade organizations—reflect growing anxiety about this decline. The government’s response? A flashy announcement of the so-called “Century of Turkey Development Initiative” by the Ministry of Industry and Technology, paired with a mere 30 billion TL Credit Guarantee Fund package. This is meager compensation for an economy valued at $1.4 trillion.

Yet, the initiative lacks any concrete vision. It fails to address global trade fragmentation, AI-related risks and opportunities, or the climate crisis. There’s no viable plan for safeguarding employment, upskilling labor, or ensuring that production generates sustainable value. In essence, it boils down to another round of cheap credit—dressed up with grand rhetoric.

What a Real Industrial Strategy Requires

Turkey’s path to genuine economic transformation requires breaking free from a narrow “cheap loan” mindset. A modern industrial policy must be centered on technology and digitalization. Beyond macroeconomic stabilization, the country must invest in human capital, provide universal access to quality public education, and restore the rule of law.

Incentives should focus on targeted sectors, value chains, and logistics networks, while operating within a climate law framework. Such a strategy would not only reinvigorate industry but also support fairer wealth distribution and long-term prosperity.

Can This Government Lead a Real Transformation?

Looking not only at the missteps since March 19 but at the steady institutional decline since the 2018 shift to the Presidential System, it becomes clear: the transformative changes needed to improve real lives are unlikely to be achieved by the current ruling elite.

Source: BirGün Gazetesi
Author: Güldem Atabay

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