TÜSİAD Cost-Based Competitiveness Index Rises in Q3 2025

Summary:

Turkey’s cost-based competitiveness improved on a quarterly basis in the third quarter of 2025, supported by relatively moderate domestic costs and rising dollar-based costs in peer countries. However, annual pressures from labor and financing costs continue to weigh on exporters, according to TÜSİAD’s latest index.

The TÜSİAD Cost-Based Competitiveness Index (RGE) for the third quarter of 2025 has been published, pointing to a modest recovery in Turkey’s cost competitiveness compared to the previous quarter, while showing a slight deterioration on an annual basis.

According to the report, the index increased by 1.5% quarter-on-quarter to 90.1 in Q3 2025. This rise confirms the recovery trend that began in the second quarter of the year and signals a limited improvement in exporters’ cost-based competitiveness.

Drivers of the Quarterly Improvement

The quarterly increase was mainly driven by two factors:

• A relatively moderate trajectory in domestic production costs, and

• Rising dollar-denominated costs in competitor countries.

Together, these dynamics helped ease competitive pressure on Turkish exporters, even as global conditions remained challenging.

Annual Decline Highlights Structural Pressures

Despite the quarterly improvement, the index declined 0.3% year-on-year, reflecting persistent cost pressures. The report identifies labor and financing costs as the main drags on competitiveness over the past year.

• Labor costs reduced the index by 0.8 points on an annual basis.

• Financing costs exerted a smaller negative impact of 0.1 points.

These declines were partially offset by a 0.7-point positive contribution from intermediate goods costs, which performed more favorably in Turkey than in competitor countries.

Inflation Expectations Ease in Turkey, But Households Remain Deeply Concerned

Energy Costs Erode Previous Advantage

A detailed breakdown of cost components shows that energy costs emerged as a key challenge in the third quarter. While energy costs rose by 3.5% in competitor countries, domestic energy costs surged by 11.6%. This sharp increase eliminated the relative advantage Turkey had enjoyed in earlier periods.

Key Cost Developments in Q3

The report highlights several notable trends:

• Labor costs: Domestic labor costs declined by 0.9% in the third quarter, while they increased by 3.1% in competitor countries. Although this narrowed the competitiveness gap in the short term, accumulated labor costs continue to pressure exporters.

• Intermediate goods: Domestic intermediate goods costs remained largely flat, rising only 1.7% year-on-year. In contrast, competitor countries saw a 6.2% increase, largely due to cross-currency effects, providing Turkish exporters with a relative cost advantage.

• Financing costs: Domestic financing costs edged down by 0.4%, remaining broadly stable. However, interest rate cuts in peer economies pushed financing costs there down by 0.8%, limiting Turkey’s relative gains.

Productivity Gains Remain Limited

TÜSİAD also noted that although labor productivity showed a modest improvement compared with competitor countries, this was not sufficient to generate a meaningful positive impact on overall competitiveness.

Outlook

The findings suggest that while Turkey’s cost-based competitiveness has stabilized and improved slightly in the short term, structural pressures from labor, energy, and financing costs remain significant obstacles. Sustained gains will likely depend on productivity-enhancing reforms, more predictable financing conditions, and better cost control in energy-intensive sectors.

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