Türkiye

Financing risks remain elevated despite improved macro policy signaling. Türkiye’s large external debt stock and significant short-term refinancing needs expose the economy to changes in global liquidity and investor sentiment. The gradual normalization of monetary policy has tightened domestic credit conditions, particularly affecting SMEs and highly leveraged corporates. Corporate insolvencies have increased moderately, especially in construction, retail, transport and export-oriented manufacturing, where margins are compressed by high financing costs and real exchange rate appreciation. Banks remain broadly resilient, but loan growth has slowed and asset quality pressures are rising. The public sector continues to access markets, yet financing conditions remain sensitive to policy credibility and geopolitical developments. Sustained reserve accumulation and fiscal discipline are critical to containing refinancing risks.

Political risks remain a central feature of Türkiye’s outlook. The current leadership provides short-term continuity, but policy decision-making remains highly centralized and unpredictable, especially in economic management. Social tensions have increased amid declining purchasing power, reduced pluralism and institutional fatigue, raising the risk of protests and unrest. Restrictions on media and communication during periods of instability amplify reputational and operational risks for businesses. Looking ahead, the possibility of early elections in 2026-2027 adds uncertainty and may incentivize policy shifts that weaken stabilization efforts. Internationally, Türkiye’s assertive and transactional foreign policy continues to strain relations with Western partners, while pragmatic cooperation is likely to persist where mutual interests align. Political risks are unlikely to trigger abrupt disruption but continue to cloud the medium-term investment climate.