By Ozan Demircan
At the turn of the year, a familiar ritual repeats itself in Turkey. Gyms raise their membership fees. Tradespeople adjust their prices. Real estate agents pocket higher commissions by systematically pushing up sale prices. Hardly anyone objects. Hardly anyone asks what added value is being offered. Price hikes are taken for granted — not because products have improved, but because inflation exists.
This logic has become so deeply internalized that few even consider improving supply, quality, or efficiency. Prices rise because they are expected to rise. This is particularly bizarre in real estate — a classic investment asset. As if Turkish stocks automatically became more expensive at the start of the year simply because inflation is high.
Nominal growth does not stem from performance, but from expectation.
This is where the vague sense of unease many describe begins: Turkey is becoming wealthier, yes — but in a tense and fragile way. Six theses outline the state of the Turkish economy beyond quarterly figures and GDP data.
THESIS 1: Subjective prosperity comes from prices, not productivity
Objectively, Turkey has become richer. Per capita income rose from about $8,800 in 2020 to nearly $15,900 in 2024. Forecasts see it exceeding $18,000 in 2025 and even $22,000 by 2030. Consumption and demand reflect this rise. In 2025, the auto market hit an all-time high with 1.37 million new vehicles sold, while the housing market also reached a record with 1.69 million transactions.
Yet this growth is only partly driven by productivity gains. It mainly comes from prices. Rising prices create a sense of prosperity — at least for those who own assets. Owners feel richer. Workers mainly feel rising costs.
The result is a paradox: growth is real, but unstable. Prosperity increases without a broader foundation.
THESIS 2: Stabilization is mistaken for transformation
On the macro level, much has improved. Inflation expectations are slowly declining. Market participants expect around 23 percent by the end of 2026 and under 18 percent in 2027 — down from as high as 84 percent less than three years ago. Fiscal policy is much tighter: the budget deficit stood at 2.9 percent of GDP in 2025, better than in many EU countries. The primary balance is even in equilibrium. Central Bank reserves have risen, and capital is cautiously returning.
This stabilization is closely associated with the policies of Finance Minister Mehmet Şimşek. Restoring market credibility has been the priority. That is rational — and necessary.
But stabilization does not replace transformation. The government has ministries for industry, tourism, health, and energy, as well as a powerful defense procurement authority. Each presents annual expectations for revenues, tourist numbers, or new orders.
What is missing is an institutional focus on productivity itself. No one explicitly bears responsibility for systematically increasing efficiency, skills, and value creation. Stability is politically organized. Productivity is not.
THESIS 3: Ownership beats performance — because it is rational
This logic is evident in everyday life. In villages, land is sold when liquidity is needed — the proceeds are rarely invested to generate new income, instead disappearing into consumption. In tourist areas, returns are extracted from location and ownership without fundamentally renewing supply or quality. Demand exists. Risk is avoided. Even in strongholds like Belek near Antalya, hotels are renovated less frequently than before, under the logic that tourists will come anyway.
In a high-inflation economy with limited planning certainty, ownership is a more reliable store of wealth than productive investment. Land, property, gold, or foreign currencies offer immediate protection. New business models do not.
There is also another often overlooked factor: Turkey still faces severe forms of organized corruption, systematic tax evasion, and illicit enrichment. Not everyone pays taxes. Not everyone follows the rules. Inflation costs are therefore borne unevenly. The bill is sent to those who are formally employed, earn regular incomes, and have no means of avoidance. For them, housing, consumption, and savings are becoming increasingly unaffordable — not only because of inflation, but because of structural inequality.
In this environment, ownership is not just rational: it is a protection mechanism against a system that treats performance unequally. This is especially evident among white-collar workers — see Thesis 4.
THESIS 4: Upward mobility is becoming less rewarding for the middle class
For many in the well-educated so-called middle class, social advancement is losing its appeal. Higher earnings quickly push individuals into the top tax bracket. At the same time, unavoidable private expenses rise disproportionately, especially in dual-income households: private schools and all-day kindergartens, private healthcare, supplementary insurance, and housing. The marginal benefit of higher income shrinks.
There is also a striking nominal price level. Dining out for two in Turkish cities often costs around €100 or more — not cheap even compared with Germany’s roughly double average income. Gym memberships often range from €150 to €300 per person per month. Certain food items are more expensive than in European supermarkets. Even in districts like Fethiye, rents for two-room apartments are now comparable to Cologne or other major German cities.
The key question is: where does this money go? It concentrates among a few groups — company owners, landlords, shareholders. For employees, this means that more work does not automatically translate into more real prosperity, but often into higher taxes and fixed costs.
Behavior changes as a result. In times of high inflation, those with money do not primarily invest in productive companies or new businesses. They protect it — in real estate, in digital assets like Bitcoin, or in tangible assets.
Productive work loses appeal—asset ownership gains.
THESIS 5: Productivity exists — but remains the exception
There are counterexamples. The drone manufacturer Baykar shows that technological value creation can be globally competitive. The electric vehicle maker TOGG represents an attempt to rebuild industrial depth. Defense, electronics, and capital goods industries also show double-digit growth rates.
What stands out, however, is that these successes are strategically prioritized, politically supported, and often organized close to the state. Across the broader economy, productivity remains the exception. Industrial capacity utilization stands at around 74 percent — solid, but not a clear investment signal. Traditional sectors like textiles and apparel continue to lose competitiveness.
Productivity is possible. But it is not a societal standard.
THESIS 6: What this model means for foreign companies
For foreign companies, Turkey is neither a classic growth market nor a pure risk case. Demand exists. Willingness to pay exists. But competition often works through prices rather than efficiency or quality.
Successful firms are those that either deliver genuine, hard-to-copy value — technological, organizational, or brand-based — or consciously integrate into existing ownership and demand cycles. Long-term productivity investments require patience, local embeddedness, and often political backing.
Turkey is not a country without growth. It is a country with a specific growth model — driven by prices, assets, and inflation. Those who view it as a classic transformation market will be disappointed. Those who understand its logic can identify opportunities — and assess risks more realistically.
*Ozan Demircan is a journalist and analyst who spent more than nine years in Turkey as a foreign correspondent for a leading German daily newspaper, Handelsblatt, before becoming newspaper’s Head of Foreign Affairs in Berlin. He now writes and comments independently on German–Turkish relations, economics, and foreign policy through his two newsletters in German and Turkish. You can follow his work at substack.com/@abitofoz This article is translated with the help of AI.
