TÜSİAD: Türkiye’s Export Competitiveness Drops Below 2015 Levels

TÜSİAD’s latest data reveals a warning sign for Türkiye’s export sectors: despite a stable quarterly reading, the Cost-Based Competitiveness Index (TÜSİAD-RGE) fell 8.9% year-on-year in Q1 2025, pushing it below its 2015 level for the first time. This decline reflects mounting pressure from rising intermediate goods, labor, and financing costs, even as energy prices showed a welcome decline.

Index Stable Quarterly, but Declining Annually

In the first quarter of 2025, the TÜSİAD-RGE stood at 86.1, unchanged from the previous quarter. However, on an annual basis, the index fell sharply—signaling a drop in Türkiye’s cost-based competitiveness in key exporting sectors like automotive, chemicals, textiles, and electronics.

The breakdown shows:

• Intermediate goods costs: -4.8 points

• Labor costs: -3.2 points

• Financing costs: -0.9 points

Together, these pushed Türkiye further behind its 31 global competitors.

Only Energy Costs Declined—But Not Enough

Energy costs offered the only relief, dropping by 6.3% in Q1, continuing a downward trend from late 2024. Over the past six months, this translated to an 11% cumulative decline, offering limited gains to manufacturing exporters.

Yet, the cost gap in other critical areas widened. While intermediate goods prices in Türkiye fell just 0.2%, the average drop among rival countries was 0.9%. Labor costs, despite a record high in late 2024, only decreased 1%, offering little support for competitiveness.

Financing Costs Still Rising in Türkiye

As interest rates remain high, financing costs in Türkiye rose by 0.8% in Q1, further burdening firms. In contrast, competing nations benefited from declining borrowing costs, widening the competitive disparity in capital-intensive industries.

Labor Productivity Gains Insufficient

Although labor productivity showed modest recovery in line with competitor nations, it still fell short of offsetting the high wage pressures in Türkiye. TÜSİAD’s productivity-adjusted competitiveness index (TÜSİAD-RGEV) remained below the general RGE, suggesting that productivity growth was not enough to restore cost competitiveness.

Structural Risk for Export Sectors

TÜSİAD-RGE, which tracks 10 key manufacturing sectors including food, textiles, chemicals, metals, machinery, and automotive, compares cost differences in USD between Türkiye and its major trade rivals. A falling index signals erosion in competitive strength, raising red flags for Türkiye’s export-driven growth strategy.

TÜSİAD concludes that unless structural costs are addressed, Türkiye’s exporters will continue to lose ground in global markets.