Turkiye

Turkey built an industrial economy through crisis management—repeated cycles of growth, overheating, crash, and restructuring that somehow left each successive recovery on a higher base than the last. The 2025 stabilization attempt tests whether this pattern holds or whether the economy has finally exhausted its resilience.

The Ottoman Empire's collapse in World War I left Anatolia impoverished, its commercial classes departed, and its industrial base minimal. Atatürk's republic, founded in 1923, pursued state-led industrialization: tariff protection, public enterprises, and a secular nationalism that rejected both Ottoman tradition and communist revolution.

The crisis of the late 1970s nearly destroyed everything. Triple-digit inflation, 15% unemployment, and inability to service foreign debt brought the military coup of 1980. The generals implemented reforms designed by Turgut Özal: liberalization, export orientation, tariff reduction, and suppression of labor organizing that allowed industrial wages to fall in real terms.

What followed was transformation. Manufacturing exports, just 36% of the total in 1980, exceeded 90% by 2000. Small factories proliferated—over 140,000 new establishments between 1985 and 2001, mostly in textiles and apparel, employing fewer than 50 workers each. Turkish contractors built infrastructure across the Middle East. The export-oriented model delivered growth averaging 5% annually through the 1980s.

The 1997 Asian crisis and 2001 Turkish banking collapse brought another restructuring. The AKP, coming to power in 2002, implemented fiscal discipline, central bank independence, and EU accession preparations that restored macroeconomic stability. Growth resumed at 7% annually through the mid-2010s. The Turkish lira stabilized, inflation fell to single digits, and foreign investment surged.

Then the pattern broke. Since 2018, Turkey has lurched from crisis to crisis. President Erdoğan's insistence on low interest rates despite high inflation—a policy that contradicts conventional economics—accelerated currency depreciation. The lira lost 80% of its value against the dollar between 2018 and 2023. Inflation exceeded 85% in late 2022.

The 2024-2025 stabilization marked a grudging policy reversal. Interest rates rose above 40%. Inflation began declining from emergency levels. The current account deficit narrowed as import demand collapsed under high rates. But the adjustment cost is steep: growth has slowed dramatically, and the lira remains fragile.

By 2026, Turkey's trajectory depends on whether stabilization can hold long enough for growth to resume. The manufacturing base remains—textiles, automotive components, appliances—but years of currency volatility have eroded confidence. The question is whether Turkish economic resilience extends to one more recovery cycle, or whether this time the model requires more fundamental reconstruction.