As of 2025, Turkey’s economy faces a profound crisis. High inflation, rising unemployment, the depreciation of the Turkish lira against foreign currencies, and the dwindling purchasing power have directly impacted the daily lives of citizens. During this period, the government’s policies have painted a picture that not only fails to address the crisis but also exacerbates it. The adverse trends in macroeconomic indicators are causing social inequalities and deep concerns about the future.
Inflation and the Crisis of Purchasing Power
Official inflation figures in Turkey hover above 50%, but independent studies suggest the real inflation rate exceeds 100%. The soaring prices of basic necessities such as food, energy, and transportation have pushed a large portion of the population below the poverty line.
According to data published by Türk-İş at the end of 2024, the hunger threshold for a family of four reached 15,000 Turkish liras, while the poverty line climbed to 45,000 liras. In an economy where the minimum wage is 14,000 liras, a vast majority struggles to meet even their basic daily needs.
The Impact of Government Policies
The AKP government has long based its economic strategy on a growth model centered around construction and infrastructure projects. However, this model has fostered debt and dependency rather than sustainable development.
The Central Bank’s policy of reducing interest rates has accelerated the depreciation of the Turkish lira and triggered inflation. The government’s “low interest-high exchange rate” strategy aimed to boost exports, but due to Turkey’s import-dependent production structure, this policy has left the economy more vulnerable.
International Dimension: Credit Ratings and Foreign Investment
International credit rating agencies, such as Fitch and Moody’s, continue to downgrade Turkey’s credit rating. Turkey is now classified as “non-investment grade,” which has driven away foreign investors. As foreign capital inflows decline, Turkey’s foreign currency reserves dwindle, and the pressure on the lira increases.
Additionally, with Turkey’s external debt nearing $450 billion, the country’s weak capacity to service short-term debt creates a precarious economic profile in the international arena.
The Problem of Justice and Trust
The underlying and most fundamental issue behind Turkey’s economic crisis is the erosion of the rule of law. In a country where judicial independence is highly contentious, domestic and foreign investors struggle to find a trustworthy environment.
In a climate where predictability has vanished, capital owners are unwilling to take risks. The weakening of the rule of law and democratic values generates not only economic but also political and social crises.
Public Reaction and Anxiety About the Future
The public’s reaction to the crisis is growing louder. Youth unemployment has surpassed 25%, prompting a significant portion of the educated young population to emigrate. This “brain drain” poses a severe threat to Turkey’s future potential for economic growth and innovation.
People feel trapped not only economically but also socially and politically. The rapid impoverishment of the middle class exacerbates societal unrest and erodes trust in institutions.
Alternative Solutions
To emerge from the economic crisis, Turkey must take the following steps:
- Restoring Judicial Independence: Reforms in the judicial system could rebuild trust and encourage both domestic and foreign investments.
- Adopting a Sustainable Economic Model: The focus must shift from construction-based growth to investments in industry and technology.
- Reevaluating Monetary Policies: Evidence-based monetary policies could help control inflation.
- Ensuring Income Equality: Tax reforms should address income disparities, while social support mechanisms for low-income groups must be strengthened.
- Establishing International Trust: A more rational foreign policy approach could restore Turkey’s reputation on the global stage.
Conclusion
Turkey’s economic turmoil is not only the result of flawed economic policies but also the erosion of the rule of law and the degradation of democratic values. If the current government’s policies persist, the crisis will likely deepen.
However, with transparent, accountable governance rooted in the rule of law, Turkey can overcome this crisis. Restoring public trust and addressing the pervasive anxiety about the future requires comprehensive changes in both political and economic spheres.
This is not merely an economic crisis but one that affects all layers of society. The solution lies in a holistic approach to reform and renewal.
January 7, 2025
