Turkey's economy has stalled, highlighting a warning sign that it could grind to a halt. According to Bloomberg, Turkey's economic growth slowed by more than expected in the second quarter of 2024, dragging the country’s GDP down sharply.

Turkey's gross domestic product grew by only 2.5%, notching a highly disappointing outcome. Analysts had predicted a 3.2% increase, but reality fell short. This marked a dramatic slowdown in the country's economic growth from the 5.3% recorded in the previous three months. GDP adjusted for seasonality and calendar effects expanded by a mere 0.1% quarter-on-quarter, Bloomberg said.

According to economist Haluk Burumcekci, these figures point to a "visible weakening" of the economy, driven by a sharp slowdown in domestic consumption. In the first quarter of 2024, domestic demand was bolstered by high minimum wages and expectations of further consumer price increases. However, with interest rates soaring, demand has plummeted. In particular, Turkey’s central bank has aggressively tightened its monetary policy, raising the benchmark interest rate nearly sixfold in an effort to curb household spending and bring inflation under control.

Experts note that these excessively high interest rates are squeezing Turkish businesses, especially the textile industry. Apparel manufacturers are alarmed by weak foreign demand, rising inflation, and a lack of financing. The country’s industrial sector is also feeling the strain, shrinking by 1.8% year-over-year. In addition, exports of goods and services have barely increased. Despite these challenges, Turkish authorities remain optimistic and expect inflation to ease to 40% by the end of 2024.

Erdal Bahcivan, chairman of the Istanbul Chamber of Industry (ISO), warns that rampant inflation is creating a negative psychological climate across the nation. Of particular concern is a rapid increase in consumer prices, which is exacerbating "the sociological and psychological impact on the society," the official said. Meanwhile, Turkish authorities remain focused on monetary policy, leaving business leaders calling for concrete structural reforms, Bahcivan added.