Turkey’s Industrial Heavyweights Look to 2026 for Relief as Inflation Battle Continues

Summary:

Turkey’s largest industrial groups — including Vestel, SASA and Arçelik — are hoping to put years of weak financial performance behind them by 2026, as the painful fight against inflation begins to ease. While high interest rates, a strong lira and weak domestic demand have weighed heavily on manufacturers since mid-2023, executives and analysts see the prospect of gradual relief toward the end of this year and into 2026. Yet optimism on the factory floor is tempered by a sharp rise in bankruptcies and concordat filings, highlighting the continued fragility of Turkey’s real economy.

Tight Monetary Policy Hits Industry Hard

Turkey’s industrial champions such as Vestel, SASA Polyester and Arçelik have borne the brunt of the central bank’s aggressive tightening cycle that began in mid-2023.

High interest rates, a relatively strong lira and sharply weakened domestic demand have pushed up costs, eroded margins and undermined international competitiveness. According to Reuters data, more than half of the 238 companies in the Istanbul stock exchange’s industrials index reported losses in the first nine months of last year.

The impact has also been visible in employment. Turkey’s manufacturing sector has shed roughly 600,000 jobs over the past three years, underlining the depth of the slowdown and adding to the economic pressures weighing on President Recep Tayyip Erdoğan’s political standing in opinion polls.

Near-Term Pain, Gradual Relief Ahead

With inflation hovering around 31% and policy interest rates at 38%, the squeeze on industrial companies is expected to continue through at least the first half of the year. Executives and analysts say meaningful relief will depend on a sustained easing of both borrowing costs and currency pressures.

Some improvement is expected toward year-end, as rates and the lira gradually settle lower. The outlook for 2026, however, is noticeably more optimistic.

“We expect demand to increase in 2026 as interest rates fall, which should have a positive impact on our domestic sales,” said Bülent Yılmazel, group manager for financial affairs and investor relations at SASA, one of the world’s largest polyester producers.

“High inflation and high interest rates led to a sharp contraction in domestic demand in 2025, which was our main challenge,” Yılmazel told Reuters.

Sector Needs Deeper Rate Cuts

Turkey’s large exporters initially benefited from repeated lira depreciations following the first currency shock in 2018, combined with relatively low borrowing costs under President Erdoğan’s earlier easy-money policies. That advantage faded over the past two years as interest rates were lifted as high as 50% and the central bank largely stabilized the currency to curb imported inflation.

The central bank has now begun cutting rates, and a Reuters poll sees policy rates falling to around 28% by year-end. Such a move would offer some cost relief for industrial firms, though analysts caution that deeper cuts are needed for a full recovery.

Cemal Demirtaş, head of research at Ata Invest, said interest rates would need to fall below 30% before the sector can regain momentum. “We expect to feel more meaningful relief starting in the second half of 2026,” he said.

Following a meeting last week with Central Bank Governor Fatih Karahan, Turkey’s main exporters’ group, Türkiye İhracatçılar Meclisi (TIM), said the bank appeared ready to provide additional support to exporters, including possible incentives for converting foreign-currency earnings into lira.

Losses Mount at Industrial Flagships

Some of Turkey’s most prominent industrial names have been among the hardest hit. In the first nine months of last year, Vestel posted the largest loss among Istanbul-listed industrial firms, reporting an 18.3 billion lira ($430 million) deficit. SASA followed with nearly 10 billion lira in losses, while Arçelik recorded a loss of 6.4 billion lira.

All three companies cited weak demand in Europe and Asia as a major headwind. Vestel said the lira’s real appreciation pushed labor costs higher in euro terms, weighing on profitability in the first three quarters of 2025. Arçelik, meanwhile, pointed to persistent pricing pressures in overseas markets. Both companies declined to comment on their outlook for 2026.

At SASA, Yılmazel said high financing costs were the primary driver of last year’s losses. The company plans to refinance a significant portion of its debt this year to take advantage of falling interest rates.

“As interest rates continue to decline, the recovery will become more visible. The second half of the year should be much better than the first,” he said.

The Other Side of the Coin: Bankruptcies and Concordats Surge

While industrial giants talk cautiously about recovery, another reality is unfolding across Turkey’s broader business landscape. The country entered 2025 amid worsening cash-flow problems, tighter credit conditions and a sharp rise in bankruptcies and court-supervised restructurings known as concordats.

Once a rare and exceptional measure, concordat filings have become a widespread symptom of macroeconomic stress. Data show that in 2025, final court protection rulings rose by 106%, while temporary protection decisions increased by 63%. At the same time, 247 companies shut down entirely, underscoring that concordat is not always a lifeline.

Sectoral Fault Lines Emerge

Although financial distress is spreading across the economy, some sectors have been hit particularly hard:

• Construction: Rising input costs and slowing housing demand have disrupted payment chains.

• Textiles: Weak European demand and the imbalance between exchange rates and inflation have squeezed exporters.

• Retail and Food: Falling purchasing power and soaring rents have pushed even large chains into court protection.

• Industry and Metals: The rejection of a concordat request by Nursan Demir Çelik, once among Turkey’s top 500 industrial firms, highlighted the depth of structural damage in heavy industry.

Regional Concentration Signals Deeper Stress

The geographic distribution of concordat filings points to congestion in Turkey’s commercial hubs. Istanbul leads with 1,417 cases, followed by Ankara, İzmir and Bursa. Tourism-driven regions such as Antalya and Alanya also feature prominently, while the concentration of cases in Thrace has raised alarms about a broader contraction in industrial output.

A Fragile Path to Recovery

İmer Özer, general manager at Kocaeli-based chemical products manufacturer Koruma Temizlik, said costs had risen by 20–30% annually over the past two to three years, while sales failed to keep pace.

“With inflation easing moderately, interest rates declining at a steady pace and predictability improving, a recovery for industrial companies will become more apparent in the second half of the year,” Özer said.

Still, analysts caution that the government’s inflation targets — 16% by end-2026 and 9% by end-2027 — appear optimistic. A slower and more uneven disinflation process could delay the long-awaited recovery for Turkey’s industrial sector.

Source: Reuters, market data

***PA Turkey intends to inform Turkey watchers with diverse views and opinions. Articles in our website may not necessarily represent the view of our editorial board or count as endorsement.

Follow our English YouTube channel (REAL TURKEY):
https://www.youtube.com/channel/UCKpFJB4GFiNkhmpVZQ_d9Rg

Twitter: @AtillaEng
Facebook: Real Turkey Channel: https://www.facebook.com/realturkeychannel/***