Hitting Beyond Expectations thanks to Construction Activities: Turkiye’s GDP Growth Rebounded Strong in Q2
Bottom Line: According to Turkish Statistical Institute’s (TUIK) announcement on September 1, Turkish economy increased by a strong 4.8% YoY despite political turbulence after arrest of Istanbul mayor and opposition’s presidential candidate Ekrem Imamoglu in Q2, prolonged monetary tightening effort, tariff-related drag on global activity and high inflation. This marked the fastest pace since Q1 2024. Q2 growth rate hit above expectations as construction remained the driving sector of Turkish economy, which soared 10.9% YoY and the information and communication sector, which surged 7.1%, and industry, which gained 6.1% in annual terms.
Figure 1: GDP (%, YoY), Q3 2022 – Q2 2025
Source: Continuum Economics
According to Turkish Statistical Institute’s (TUIK) announcement on September 1, Turkiye’s GDP grew by 4.8% YoY in Q2 after expanding by 2.3% YoY in Q1 supported by household consumption and robust investments. Despite high inflation and high interest rates were expected to continue weighing on real consumer demand along with subdued external demand due to the tariff-related drag on global activity and domestic political turbulence after arrest of Istanbul mayor and opposition’s presidential candidate Ekrem Imamoglu; economic growth hit beyond expectations as construction remained the driving sector which soared 10.9% YoY along with the information and communication sector, which surged 7.1%, and industry, which gained 6.1% in annual terms. This marked the fastest pace since Q1 2024. (Note: According to TUIK’s announcement, Turkish economy grew by 1.6% in Q2 over the previous quarter on a seasonally and calendar-adjusted basis).
On sectoral front, agriculture, forestry, fisheries, and public administration contracted. The fall in agriculture sector was remarkable, which fell 3.5% on an annual basis. Gross fixed capital formation rose by 8.8% YoY, household consumption increased by 5.1%, and imports of goods and services grew by 8.8%. Final government consumption expenditures fell by 5.2% due to a focus on savings.
Commenting on the figures, Treasury and Finance Minister Mehmet Simsek said "On the production side, value added increased in all sectors except agriculture, which contracted due to frost damage. Our manufacturing industry recorded its strongest performance in the past 12 quarters." Looking ahead, Simsek said, "We expect growth to gradually reach its potential level as financial conditions improve and uncertainties in global trade ease."
We continue to think H2 2025 growth will be likely be higher than H1 supported by positive impacts of the rate cuts and increasing business confidence assuming no dramatic impact from weaker external demand. Despite strong rebound in Q2, there is still a downside risk that growth will remain under pressure in Q3 and Q4 due to all anti-inflation policies coupled with adverse global outlook. Additionally, the continuation of Russia-Ukraine war is an important risk factor for Turkiye.