Poor growth trend continues
When examined in the context of the economic activities that make up GDP, the most striking development was the 13.3 per cent growth in agriculture, driven by favourable weather conditions. Industry, which had contracted by 0.8 per cent in the previous quarter, recorded growth of 2.4 per cent during this period. However, labour force data indicate that 121,000 jobs were lost in the second quarter of the year. From this, we can infer that stagnation persists in labour-intensive sectors such as textiles and furniture, whilst sectors with relatively high added value, such as the defence industry, have seen a surge, partly due to the global war environment.
The most striking development, however, was the shift in the construction sector from 3.2 per cent growth to a 1.9 per cent decline. This marks the first contraction in the sector since the third quarter of 2022. High interest rates and the completion of reconstruction activities in the earthquake-affected region appear to be the most obvious reasons for this negative picture. This result seems somewhat contradictory given that a rise of 25,000 in employment was recorded in the construction sector during the quarter in question. It raises concerns that the slowdown in construction may also affect employment in the coming period.
THE SHARE OF LABOUR IS DECLINING
Whilst the share of labour costs in value added stood at 42.7 per cent in the first three months of the year, it fell to 38.1 per cent in this quarter. This is clear evidence of impoverishment caused by the erosion of wage increases at the start of the year due to high inflation. The fact that there will be no increase in the minimum wage – and, consequently, in private sector wages to a large extent – in the second half of the year suggests that this unfair trend will continue until the end of the year. There has even been a decline compared to the 38.3 per cent share of labour payments recorded in the second quarter of the previous year. This underscores the fact that the imbalance in the distribution of income and wealth in the country is gradually deepening.
THE ILLUSION OF WEALTH
Following the announcement of the growth figures, the Minister of Treasury and Finance, Mehmet Şimşek, stated that national income had exceeded 1.7 trillion dollars. According to Şimşek, per capita income is set to rise to 18,040 dollars in 2025, enabling Turkey to join the group of high-income countries. In one respect, this is a consequence of the economic policy being implemented, which relies on a currency appreciation below the rate of inflation, thereby ultimately inflating national income figures denominated in dollars. In another respect, this phenomenon—due to the existence of a significant income and wealth distribution gap in the country—creates a favourable environment not only for those wishing to purchase property or holiday abroad, but also for those who consume predominantly imported goods. It is reminiscent of the ‘Plata Dulce’ periods commonly seen in Latin America when such programmes were implemented, which generally ended in failure. Ordinary citizens, quite rightly, continue to ask in bewilderment, ‘Why am I not feeling this increase in prosperity?’
INCENTIVE FOR CAPITAL MARKETS
It is not only ordinary people who make a living solely through their labour, but also employers who have recently been voicing their complaints, particularly regarding the ‘deindustrialisation’ agenda. The loss of 420,000 permanent jobs in the manufacturing sector confirms this observation. Turkey is one of the economies struggling to compete globally in the manufacturing sector with East Asian countries, led by China. It is also a separate reality that it is losing market share in labour-intensive sectors, particularly in textiles, to countries such as Egypt, Vietnam and Bangladesh, where labour is cheaper. However, there are also a significant number of firms facing difficulties due to the policy of a low exchange rate and high interest rates.
Employers’ representatives have begun to raise their voices more loudly, knowing that they can secure relatively easy concessions as election periods approach. Firstly, despite the effective reduction in policy interest rates from 40 per cent to 37 per cent, they are calling for a further interest rate cut in September. Secondly, whilst the pace of exchange rate increases has accelerated slightly, foreign exchange conversion support for exporters continues. The third pillar of support for capital is the announcement of a financing package designed to reduce annual financing costs for the manufacturing sector by up to 25 per cent, whilst the Investment-Commitment Advance Loan (YTAK) has been increased to 750 billion lira.
NO CONCESSIONS FOR WAGE EARNERS
Conversely, no steps have been undertaken to address the loss of living standards faced by wage earners or to alleviate the increasingly severe problem of personal debt. On the contrary, hopes are pinned on a weakening of demand from the labour sector to bring down inflation.
The economic programme currently in place would collapse if interest rates were to be sharply reduced, due to a flight to foreign currency and capital outflows. For this reason, the comprehensive easing policy observed in the run-up to the 2023 elections cannot be implemented. It seems highly likely that the country will head into the elections under a scenario where inflation has not been significantly reduced, satisfactory growth has not been achieved, yet the economy has not faced any severe turbulence either.
Aware that they cannot write a success story for the economy, those in power are pursuing a strategy of expanding their alliances through underhand methods and dispersing social opposition through increased repression. In this situation, there is no alternative but to raise social demands, expose the policies that are systematically impoverishing workers, and strengthen the ranks of the opposition.
Note: This article is translated from the original article titled Büyümede zayıf seyir sürüyor, published in BirGün newspaper on September 1, 2026.