Turkish Economy Expanded by 3.7% in Q3 Backed by Robust HH Consumption and Investments
Bottom Line: Turkish Statistical Institute (TUIK) announced GDP growth for Q3 on December 1. Turkish economy grew by 3.7% YoY in Q3 backed by household consumption, investments, and government spending.
Figure 1: GDP (%, YoY), Q1 2022 – Q3 2025
Source: Continuum Economics
Despite stubborn inflation and high interest rates continue to weigh on real consumer demand along with subdued external demand due to the tariff-related drag on global activity, Turkiye's GDP growth hit 3.7% YoY in Q3 backed by robust household consumption, investments, and government spending. GDP edged up by 1.1% in the three months to September on q/q, down from 1.6% in the previous quarter.
According to announcement, final consumption expenditure by resident households surged by 4.8% y/y, and government final consumption expenditure increased by 0.8%. Fixed investments surged to their highest in two years with increasing 11.7% y/y.
On sectoral level, annual growth of industrial production edged up from 6% to 6.5% while manufacturing output expanded by 7.7% y/y, after a 6.9% in Q2. The construction sector also maintained robust momentum, and accelerated from 11.1% growth in Q2 to 13.9% in Q3.
Speaking about Q3 growth figure, Finance Minister Mehmet Simsek said "We anticipate that growth will remain moderate in the final quarter and exceed the Medium-Term Program slightly in 2025." Simsek added that "More favorable financial conditions and a supportive global environment are expected to drive stronger economic activity in 2026 compared with this year.” (Note: Turkish government’s growth forecast for 2025 is 3.3% in the Medium-Term Program).
Supported by positive impacts of the rate cuts and increasing business confidence assuming no dramatic impact from weaker external demand, we think GDP growth will remain its strong pace heading towards 2026. There is still a downside risk that growth will remain under pressure in Q4 2025 and in H1 2026 due to high interest rates, contractionary fiscal actions and additional macro prudential policies to fight against the elevated inflation coupled with adverse global outlook. Additionally, the continuation of Russia-Ukraine war is another important risk factor.