Turkey Faces Q4 Slowdown as BETAM Forecasts Economic Contraction

Turkey is set to close 2025 with clear signs of economic stagnation, according to a new report published by the Bahçeşehir University Center for Economic and Social Research (BETAM). Titled “Stagnation in the Fourth Quarter,” the report forecasts that Turkey’s GDP will contract by 0.6% year-on-year in the fourth quarter of 2025, driven primarily by weakening industrial output and declining exports that are weighing on consumption-led growth.

The growth outlook report, authored by Prof. Dr. Seyfettin Gürsel and Dr. Oğuz Yurtoğlu, draws on leading indicators from October and November, which collectively confirm a marked loss of momentum in overall economic activity. While some sectors continue to show resilience, the broader picture suggests that Turkey is ending the year under growing recessionary pressure.

Industrial Output Slows Sharply While Services Hold Ground

A closer look at sectoral performance reveals that industrial production is the main drag on growth. According to a report by Dünya Gazetesi, multiple industrial indicators point to a pronounced slowdown, reinforcing BETAM’s cautious outlook.

The most severe decline is expected in durable consumer goods, where output is projected to fall by 8.8% year-on-year. This sharp contraction reflects both weakening domestic demand for big-ticket items and reduced external orders. The broader manufacturing sector is also under pressure, with an anticipated 4.5% annual decline, highlighting the challenges facing producers amid tighter financial conditions and rising costs.

Another key indicator, the capacity utilization rate, is forecast to decline by 1.4 percentage points compared to last year, signaling underused production capacity and subdued investment appetite across the industrial landscape.

Despite this downturn in production, the services sector is expected to act as a stabilizing force. Annual growth in services demand is projected at 3.1%, providing a cushion that prevents a deeper economic contraction. This divergence underscores the ongoing structural imbalance between goods-producing sectors and service-based activities in the Turkish economy.

Consumption and Public Spending Act as Shock Absorbers

While overall growth momentum is fading, household consumption and public expenditures are playing a critical role in limiting the scale of the slowdown. BETAM’s analysis suggests that even under tight monetary conditions, consumer activity has remained relatively resilient during the fourth quarter.

Spending financed through consumer loans and credit cards is expected to increase by 10% year-on-year, indicating that households are continuing to rely on borrowing to sustain consumption levels. This trend, while supportive of short-term demand, also raises questions about household balance sheet sustainability in a high-interest-rate environment.

At the same time, public consumption is forecast to rise by 4.9% annually, reflecting the government’s continued role in supporting economic activity. State spending, particularly on services and administrative functions, appears to be functioning as a counter-cyclical tool, softening the impact of private-sector weakness.

External Trade and Investment Enter a “Winter Phase”

BETAM’s report paints a notably pessimistic picture for exports and investment, both of which are struggling amid global economic headwinds and elevated production costs. Turkey’s export-driven growth model has lost momentum as external demand weakens, particularly in key European markets.

According to the report, exports are expected to decline by 6.5% year-on-year in the fourth quarter, marking a significant setback for trade performance. This contraction reflects not only softer global demand but also competitiveness challenges stemming from higher input costs and financing constraints.

The automotive sector stands out as one of the hardest-hit areas. Imports of private vehicles are projected to plunge by 22.1%, a decline that highlights both subdued consumer demand and tighter credit conditions. This contraction has broader implications, given the sector’s strong linkages to manufacturing, trade, and services.

Housing Market Confirms Cooling Trend

The slowdown is also clearly visible in the housing and real estate market. BETAM estimates that housing loans will decline by 11.6% year-on-year, reinforcing signs of cooling in property-related activity. Higher mortgage rates and reduced purchasing power continue to weigh on housing demand, dampening investment and construction-linked growth.

This contraction in housing finance aligns with the broader tightening cycle and suggests that real estate, once a key driver of domestic demand, is no longer providing the same level of economic support.

An Economy Closing the Year Under Pressure

Taken together, BETAM’s fourth-quarter forecast indicates that Turkey will end 2025 in stagnation rather than recovery. While services, consumption, and public spending are preventing a sharper downturn, the contraction in industry, exports, and investment highlights persistent structural vulnerabilities.

The report underscores that consumption-led growth, without stronger industrial and export performance, is proving insufficient to sustain momentum. As Turkey moves into 2026, the balance between inflation control, financial tightening, and growth support will remain a central challenge for policymakers.