Pro-gov’t business group warns Turkey risks ‘losing industry’ amid high financing costs, inflation

A business group close to the government of President Recep Tayyip Erdoğan has issued a rare public warning about the direction of the economy, saying Turkey could “lose its industry” unless structural problems, high borrowing costs and persistent inflation are addressed.

Burhan Özdemir, head of the Independent Industrialists and Businessmen’s Association (MÜSİAD), told the Nefes daily in an interview published on Monday that inflation can no longer be reduced through tight monetary policy alone and called for broader reforms.

Turkey’s annual consumer inflation has stayed above 30 percent since December 2021, rising to 85.51 percent in October 2022, easing to 38.21 percent in June 2023, climbing again to 75.45 percent in May 2024 and then slowing to 30.65 percent in January 2026.

However, the official figures are challenged by independent economists from the Inflation Research Group (ENAG), who estimate consumer price inflation at 53.4 percent over the past 12 months.

“Inflation in goods has fallen to around 17 percent,” Özdemir said. “But if you cannot bring down rent and food prices, there is little you can achieve. We need structural solutions.”

Turkey has pursued interest rate increases since mid-2023 following the general election in an attempt to rein in inflation after years of low-rate policies. Goods inflation has eased, but food and rent remain stubbornly high for most Turks.

Özdemir forecast year-end inflation of between 23 and 25 percent and said financing costs were now the biggest challenge for manufacturers.

“You can access loans, but the cost is very high,” he said.

Last week Turkey’s central bank raised its end-2026 inflation forecast range to from 13-19 percent to 15-21 percent and projected inflation at between 6 and 12 percent at the end of 2027, according to its Inflation Report 2026 I.

Özdemir also complained that pricing in Turkey is not properly monitored and that cost-based analysis is lacking.

“In this country, no one asks what it costs to produce a kilo of ice cream,” he said. “It’s not normal to drink the same tea for 500 lira [$11.4] in one place and 5 lira [$0.11] in another,” he added, citing what he described as weak cost-based pricing and regulation.

He also described widespread idle capacity in industry.

“I travel across Turkey visiting factories. Production lines are empty. Where 300 people should be working, production continues with 100,” he said. “There is no need to build new factories while existing ones are underused.”

According to the businessman, industry’s share of GDP has fallen from 25 percent in 1996 to about 17 percent today.

“Otherwise, we will lose our industry,” he warned, pointing to growing competition from China in sectors such as automotive, steel and electronics.

Recent data confirm the strain as Turkey’s manufacturing capacity utilization rate fell to 74.5 percent in 2025, the lowest level since the post-pandemic recovery.

The İstanbul Chamber of Industry’s purchasing managers’ index registered 48.1 in January 2026, marking the 22nd consecutive month of contraction

Concerns about deindustrialization are not new. In January the Turkish Union of Engineers and Architects’ Chambers warned that Turkey is becoming increasingly dependent on imported intermediate and high-technology goods, with high-tech products accounting for only a small share of exports.

MÜSİAD has traditionally supported the government’s economic policies, making Özdemir’s remarks noteworthy. While he did not call for a break with the current model, he urged closer coordination between ministries and greater state monitoring in industrial policy.

MÜSİAD is a major Turkish business organization founded in İstanbul in 1990 by a group of entrepreneurs. It operates as a nongovernmental association with a public benefit status and has thousands of members domestically and abroad.