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One in Five Turkish Companies in De Facto Bankruptcy as Bankruptcy Demands Hit Record Levels

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Turkey’s economic stress is deepening, with nearly 20% of firms operating as “zombie companies” while court filings for debt enforcement and bankruptcy hit historic highs. A new report warns that systemic financial instability and judicial backlogs are escalating alongside economic crime.

Surge in Zombie Companies Amid Credit Crunch

According to the latest report by the independent think tank Institute for Social Studies, one in every five companies in Turkey is effectively bankrupt, staying afloat only through government support and loan restructuring. These so-called “zombie companies”—firms unable to generate enough income to cover operating costs or debt—have reached nearly 20% of the non-public corporate sector, making Turkey the country with the highest ratio in the world, as also noted by an IMF report titled “The Rise of the Walking Dead.”

SME Loans Shrink in Real Terms

While nominal lending to SMEs grew by 120% between January 2023 and May 2025, cumulative inflation of over 240% during the same period significantly eroded the real value of credit. In practice, this means that SMEs are borrowing more but receiving less in real purchasing power, making it increasingly difficult to sustain operations or invest.

Record Levels of Bankruptcy and Enforcement Cases

The financial crisis is now fully visible in the judiciary. The number of enforcement and bankruptcy files reached 38.3 million in 2023, the highest figure in Turkish history. Although that number declined slightly to 32.7 million in 2024, processing times have surged. According to the Justice Ministry, the average duration of a case jumped from 582 days in 2023 to 918 days in 2024—a 57% increase—due to the overwhelming caseload.

Economic Crime on the Rise

Alarmingly, economic crimes have also spiked. In 2024, one in every 14 Turkish citizens was linked to an economic offense. The number of suspects in property-related crimes rose from 5.8 million in 2022 to over 6 million in 2024, while total offenses climbed to 8.9 million.

Analysts interpret this trend as a social symptom of economic desperation. The Institute warns that these figures signal not just a cyclical downturn, but a broader system at risk of structural collapse unless urgent reforms are implemented.

Concordatum (Bankrupty Protection) Applications Nearly Double in First Five Months

Another stark indicator is the surge in concordatum filings (a legal restructuring alternative to bankruptcy). In the first five months of 2025, courts issued 967 temporary concordatum protection orders, up 97% compared to the same period in 2024.

May 2025 alone saw 185 temporary orders, while permanent concordatum approvals soared 242% to 690 cases during the January–May period. Courts rejected 462 applications—a 98% year-on-year rise—while 77 full bankruptcy rulings were issued, marking a 75% increase.

Textile Industry Hardest Hit

The textile sector emerged as the most distressed, with 71 temporary concordatum filings recorded so far in 2025. Industry insiders cite rising costs, plummeting domestic demand, and declining export competitiveness as core issues.

Experts warn that if current trends continue, 2025 could break the all-time record for bankruptcy protection filings, surpassing 2023’s peak of 1,723.

Urgent Need for Reform

The Institute for Social Studies calls for immediate structural reforms, including:

  • Long-term financing solutions for SMEs

  • Streamlining of enforcement and bankruptcy procedures

  • Measures to enhance judicial efficiency

  • Institutional safeguards to reduce economic crime

Without such interventions, Turkey’s economic woes risk spiraling into a broader institutional crisis with long-term consequences for growth, employment, and investor confidence.

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